The Federal Board of Revenue (FBR) would be able to track down Benami accounts of traders, maintained in the names of their family members or servants to conceal income/turnover, through documentation measure of withholding tax on banking transactions of non-filers. A senior FBR official told Business Recorder here on Saturday that presently traders are not declaring all bank accounts. The number of bank accounts is in millions as compared to return filers less than a million. There are Benami bank accounts of traders which are used to carry out business transactions out of the tax net.

These accounts are not declared in the income tax returns. There was an apprehension among the trade that if they would declare all their accounts in returns, their turnover would increase which would raise the ratio of turnover tax. When all accounts are declared, there would be a visible difference in the annual turnover of the business. Due to this reason, the FBR would decide about the ratio of turnover tax on sector to sector basis.

The withholding tax on banking instruments of non-filers is a documentation measure for expanding the tax net, sources maintained. The FBR official said that the Pakistan Banks Association (PBA) is fully co-operating with the FBR and the association has no objection in providing relevant data to the tax authorities. In this regard, the FBR will work out the benchmarks or modalities with the banks for collection of information pertaining to the banking transactions. However, the FBR is interested in banking transactions where very high tax deductions have been made on annual basis. This would be instrumental in tracing persons involved in buying and selling of properties, but under-declaring their transactions. Moreover, undeclared business transactions would also be documented. The FBR would be able to register persons liable to file returns and pay due amount of taxes.

The government has already decided to reduce 0.6 percent withholding tax on banking transactions of non-filers to 0.3 percent for a period of three months up to September 30, 2015. From October 1, the 0.6 percent rate would be restored. The traders, who would file their returns by due date, would not be required to pay this 0.6 percent withholding tax.

Under the agreement between business community and FBR in a meeting held in FBR HQ on July 9, 2015, it has been decided that 0.3 percent WHT adjustable for non-filers up to September 30, 2015. Secondly, the non-filers would file their returns on September 30, 2015 for period ending June 30, 2015. Thirdly, the extension of schedule-III of the Sales Tax Act 1990 to be undertaken/considered on sector to sector basis for sales tax. Fourthly, the turnover tax will be agreed, according to various trade and sectors, between FPCCI and FBR. Fifthly, the FBR and business community shall hold in depth and meaningful parleys to resolve the issues related to filing of returns.

Copyright Business Recorder, 2015