ISLAMABAD: The government is set to increase the rates of 56 withholding taxes (WHTs) for non-filers of income tax returns in the next fiscal year.

An official source privy to the budget-making process told Dawn on Tuesday that the existing WHT rates will be further increased while the scope of these taxes will be extended to a maximum number of sectors.

“We have decided to raise WHT rates for non-filers by 100pc and (extend them to the) segments that were not covered previously,” the source said.

The increase in the incidence of taxation will compel people to file tax returns and come under the tax net to avoid higher rates meant for non-filers.

The PML-N government has imposed 20 new WHTs since June 2013 while increasing the rates for non-filers on the pretext of improving tax compliance.

The number of WHT categories has risen to 56 from 36 since June 2013. As a result, WHT equalled 68 per cent of the total direct tax collection in the first eight months of the current fiscal year.

Official documents of the Federal Board of Revenue (FBR) show higher withholding tax rates for non-filers in 18 sectors, including the tax on dividends, banking transactions other than through cash, purchase of immovable property, immoveable property, motor vehicles, brokerage and commission, private motor vehicles, cash withdrawal from a bank, petroleum products, transport services, payment for goods and services, profit on debt, dividend income and sales to retailers, distributors, dealers and wholesalers.

The source said the government is also considering an increase in the rates of WHT on properties.

Higher WHT rates for non-filers resulted in an increase in the number of income tax return filers. WHTs have also emerged as a leading source of revenue generation for the government.

The FBR received 1.202 million income tax returns until March for 2015-16 against 1.03m full-year tax returns for 2014-15.

In order to implement this scheme, the FBR issues an Active Taxpayers List that is available on its website. Withholding agents are required to use this list to determine the return-filing status of an individual or entity for the imposition of the WHT.

According to the source, there are certain imports on which the government has introduced higher rates for non-filers. In the next budget, more imports will be brought under this regime. As for the withholding tax on payments to non-resident Pakistanis, higher rates for non-filers will also be extended further in the next budget.

As for the banking transaction tax, the source said it will be increased to 0.6pc on transactions exceeding Rs50,000 a day in the next budget. Currently, a lower rate of 0.4pc is applicable in the light of a decision by the Economic Coordination Committee (ECC).

According to the FBR document, WHT rates will be increased for non-filers on transactions on the Pakistan Mercantile Exchange, education-related expenses remitted aboard, payment to residents for the use of machinery and equipment, bonus shares issued by companies not quoted on the stock exchange, bonus shares issued by companies quoted on the stock exchange, tax on the purchase of international air ticket/domestic ticket, tax on dealers, commission agents and arhtis, and the collection of advance tax by educational institutions.

Higher WHT for non-filers is also likely on advance tax on cable operators and electronics, tax on foreign-produced TV plays and serials, tax on functions and gatherings, sale by auction, telephone, tax on steel melters and re-rollers, electricity bill of domestic consumers, electricity bill of commercial and industrial consumers, CNG gas station bill, collection of tax by the stock exchange, withdrawal of balance under pension funds, prizes and winnings and income from property.

Published in Dawn, April 19th, 2017