FBR Reforms: Proposes Increase in Minimum Tax, Launches Nationwide Directory of Withholding Tax Collection

Federal Board of Revenue (FBR) has announced launching a nationwide Management Information System (MIS) to manage the Withholding Tax collection.

The real-time MIS will contain directory like features to assist tax-collectors for withholding tax collection. Head of FBR, Mr. Muhammad Irshad was present at the practical demonstration of the new system at the FBR House, on Wednesday.

Also Read: FBR Has a Mind Of Its Own: Additional Withholding Tax for Telecom Sector

The system has been equipped with the ability to analyze current withholding data with historical withholding collections. It is going to enable FBR to broaden the withholding tax net by enforcing the withholding agents to be compliant with tax laws. FBR will also be having a better monitoring and control to non-compliant withholding agents among others.

Key Features of the MIS:

Following are the salient features of the newly launched MIS at the FBR:

  1. Tax Collection Report (Range/Units)
  2. Sectorial Withholding Tax Collection Report;
  3. Section wise Withholding Tax Collection Report
  4. Withholding Agent’s Monthly Tax Collection Report
  5. Withholdee’s Monthly Tax Collection
  6. Graphical Dashboards & Key Performance Indicators (KPI)
  7. Historical Comparative Reports – Withholding Tax Collection vis-a-vis preceding year’s Withholding Tax Collection
  8. Automated Response Management: officers sending reminders to field officers for enforcement and response tracking

Also Read: FBR Wants Tax Reforms To Bring Foreign Brands Operating Via Local Franchises, Into Tax Net

Increase in Minimum Tax Rates

FBR is suggesting increasing minimum tax by 25% from its current rate. The minimum tax rate is currently set at 1%, while FBR is trying to increase it to 1.25%. World Bank has set a minimum target for Rs4.06 trillion for tax collection – a mark which is well above the current Rs. 3.887 trillion. It is interesting to note that Tax Reforms Commission (TRC) had suggested for tax reliefs to be given in budget 2017-18.

What is minimum tax?

Minimum tax is a revenue tax in case any company gets net revenue over Rs. 10 million. This tax is irrespective of a company making profit or loss and is solely based on sales turnover. One of key strategies in avoiding ordinary taxes for companies in the past has remained showing net loss in financial books.

Also Read: E-Commerce in Pakistan, The Tax Story

The minimum tax is implemented so that companies cannot use the loopholes in the system.

FBR Collections

There are currently 24,000 tax-paying companies in FBR system out of which 7,000 companies are showing annual losses or zero profits.

FBR collections have increased from Rs1.956 trillion in 2013 to Rs3.114 trillion in 2016.

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