ISLAMABAD, Sept 18: The collection of withholding tax registered a growth of 9.7 per cent to Rs92.193 billion during the year 2003-04, against Rs84.057 billion the previous year.

A quarterly review report of the CBR released on Saturday showed that withholding tax continued to be a dominant component of income and corporate taxes with a share of 51.4 per cent in net collection and 49.6 per cent share in the gross collection during the year under review over the previous year.

Withholding tax on contract was the leading contributor with 28.2 per cent share, followed by imports (24.9 per cent), salary (13 per cent), exports (7.13 per cent) and interest (5.2 per cent).

Regarding revenue contribution, it was highest for salary sub-head with 21 per cent growth, followed by exports and contracts, both recording growth of 13.5 per cent and 13.3 per cent, respectively.

The primary factor responsible for this performance has been the improved economic activity in respective areas. For instance, higher volume of trade transactions has led to additional withholding deductions on imports and exports. Similarly, higher government spending on infrastructure has contributed towards higher deductions on contracts.

The report further says besides major contributors of withholding tax, a substantial growth of 53.2 per cent was recorded in the case of withholding tax deductions on telephone bills due to ever increasing use of mobile phones and prepaid phone cards. Another indicator of economic prosperity was the increased consumption of electricity. The 14 per cent increase in collection on electricity bills has been possible due to increased consumption.

The withholding tax on securities and interest payments while remaining significant contributors to revenue have lost their growth potential. Their share has been declining continuously for quite some time due to a declining cost of borrowing, added the report.