News: With­hold­ing tax fails to dis­ci­pline non-fil­ers

Enterprise - - Con­tents -

De­duct­ing with­hold­ing tax on bank trans­ac­tions of over Rs50,000 per day is a mea­sure in­tro­duced to pe­nalise non-fil­ers of in­come tax, but it is ef­fec­tively be­ing used to pun­ish the fil­ers, as banks do not use tech­nol­ogy to ver­ify their sta­tus.

The ac­tive tax­payer sta­tus can be ver­i­fied from the tax­pay­ers’ fa­cil­i­ta­tion por­tal of the Fed­eral Board of Rev­enue (FBR) by any in­di­vid­ual or in­sti­tu­tion by en­ter­ing IT in the first col­umn and CNIC num­ber of the ac­count holder in the of reg­is­tra­tion num­ber col­umn. This is an easy process which does not re­quire a spe­cific re­quest by the ac­count holder to reg­is­ter him/her as an ac­tive filer.

All the banks have the CNIC num­ber of each ac­count holder. They can carry out the ver­i­fi­ca­tion process to fa­cil­i­tate their cus­tomer. Or if this is not pos­si­ble, each branch can im­me­di­ately ver­ify the ac­tive tax­payer sta­tus when­ever a cus­tomer places a re­quest.

In­stead, when you visit some bank branches they ask you to pro­vide the Na­tional Tax Num­ber which is then sent to their head­quar­ters for ver­i­fi­ca­tion. It may take a day or two.

In the mean­time, if the cus­tomer wants to with­draw a hefty amount in cash, the bank deducts 0.3 per­cent from filer and 0.6 per­cent from non filer. How­ever, in case of a doc­u­mented trans­fer like cross check or draft made through the ac­count there will be no de­duc­tion in case of filer and 0.4 per­cent in case of non filer. This way the money trans­fer is doc­u­mented at both ends.

The fil­ers have been pro­tected by FBR. The banks how­ever are not fa­cil­i­tat­ing them. Un­til last year, the in­come tax filer had to pro­vide the NTN num­ber to the bank and their head of­fice ver­i­fied the ac­tive sta­tus through this num­ber.

The NTN-based ver­i­fi­ca­tion was not fully trans­par­ent as nu­mer­ous NTN num­bers were miss­ing from the ac­tive tax­pay­ers list be­cause the CNIC was made NTN at least for salaried per­sons.

NTN is used for ver­i­fi­ca­tion of as­so­ci­a­tion of per­son and reg­is­tered com­pa­nies. The FBR from 2015-16 an­nounced that sta­tus of ac­tive tax­pay­ers for salaried class can be ver­i­fied by en­ter­ing the CNIC num­ber in its ac­tive tax payer por­tal.

Some banks ver­ify the sta­tus promptly while some lament they do not have in­ter­net fa­cil­ity at their branch. When asked how they con­duct on­line busi­ness they say the con­nec­tiv­ity is re­stricted to the bank only.

The rea­son given is em­ploy­ees are not al­lowed to go on other web­sites. This seems ab­surd. In­stead of en­sur­ing dis­ci­pline among work­ers, the bank re­stricts the use of tech­nol­ogy.

One con­sumer said this re­stric­tion is use­less when web con­nec­tiv­ity is freely avail­able in smart­phones. He said in or­der to get reg­is­tered as an ac­tive tax­payer; he brought a copy of ver­i­fi­ca­tion from the FBR por­tal and re­quested the staff to ver­ify it through their smart­phones.

But they were hes­i­tant be­cause their stan­dard op­er­at­ing pro­ce­dures do not al­low this. They have to adopt a lengthy route for ver­i­fi­ca­tion.

If a cus­tomer wants a pay or­der worth Rs7.7 mil­lion that he has to pay the same day, the bank deducts 0.4 per­cent as with­hold­ing tax amount­ing to Rs30,800 if his sta­tus as an ac­tive tax­payer is not con­firmed in time.

The bank will then de­posit this amount in the FBR ac­count in seven days. To keep this amount from deb­it­ing to the FBR’s ac­count, the cus­tomer has to visit the bank again within seven days.

Once the amount is trans­ferred, the cus­tomer will have to go through the has­sle of re­funds. The story of late re­funds and as­so­ci­ated has­sle and palm greas­ing is known too well in busi­ness cir­cles. Get­ting re­funds for an in­di­vid­ual will be even more dif­fi­cult.

It is very sad that even our pri­vate sec­tor is hes­i­tant to use mod­ern tech­nol­ogy. Ver­i­fy­ing the ac­tive tax­payer sta­tus hardly takes a minute or two. The State Bank of Pak­istan’s bank­ing con­trol depart­ment needs to take mea­sures to fa­cil­i­tate bank de­pos­i­tors.

The non-fil­ers face no has­sle, as the law is clear that the de­duc­tion will be made from their bank­ing trans­ac­tions. The fil­ers are treated as cul­prits till their ac­tive sta­tus is ver­i­fied after lot of has­sle.

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