Advance income tax; a liability, not revenue. Saud Mehmood

Karachi, January 22, 2019 (PPI-OT): Saud Mehmood, Chairman, Taxation Sub-Committee of SITE Association of Industry in a press statement, has said that We strongly believes that the complex web of advance income taxes being withheld at every conceivable stage such as sales to customers, imports, payment of utility bill, cash withdrawal, buying cars etc stems from the wrong practice of recording withheld income tax as REVENUE. Even though, for filers, withheld income tax is adjustable/ refundable, the process is painstakingly slow as income tax officers do not want to lower their revenue collection figure by approving refunds. If advance income tax was recorded as liability, there would be no incentive to impose plethora of advance income taxes because collection of advance income tax will not help meet targets.

He said, “It is redundant to impose withholding taxes on Filers in the presence of quarterly payment of advance tax u/s 147 therefore all withholding taxes u/s 148(import), 153(sales), 231(Cash withdrawal from banks), 235(electricity consumption) and 236(Phones and internet) should be removed. The above step will reduce the cost of doing business for filers while encouraging non-filers to become a part of the tax net. However, for non-filers, the withholding scheme should remain the same where withholding tax will continue to be treated as indirect tax on consumption just like the sales tax.

Saud Mehmood further added that Another disconnect between policy and execution is evident from the fact that rate of Income Tax was brought down from 35% to 30% as part of a fiscal policy to spur growth by leaving a larger share of the profits with the private sector to reinvest. However, a much larger portion of the private sector liquidity than the 5% reduction in tax rate is blocked as advance income tax, not being refunded by income tax officers because of the fear of missing out on their quarterly targets thereby rendering the fiscal measure of tax relief completely ineffective.

He Said ,The key opposition to removal of withholding taxes from FBR is based on the fact the WHT on Filers is also recorded as revenue even though it is just an estimated tax liability. Unless WHT and advance tax paid by filers is not treated as liability, FBR officials will continue to treat Income tax as an indirect tax on consumption to boost their revenue collection the easy way. For a manufacturer, who is a filer with over three years of business there is hardly any probability of default in the presence of quarterly collection of advance income tax u/s 147 therefore this futile and counterproductive exercise of imposing advance tax on manufacturers who are filers should be withdrawn immediately.

For more information, contact:
Secretary General
S.I.T.E. Association of Industry
H-16, Textile Avenue, SITE, Karachi
Tel: +92-21-32562883, +92-21-32560705
Fax: +92-21-32560704
E-mail: site@site-association.org
Website: www.site-association.org