The Auditor General of Pakistan (AGP) has reported that the surge in withholding tax collection to Rs2.74 trillion during the fiscal year 2023-24 was primarily due to higher tax rates imposed on the salaried class, according to a news report.
The AGP’s 2024-25 report on Inland Revenue and Customs shows that withholding tax collection relies on the person making the payment, treating them as a withholding agent. The at-source deduction mechanism makes it easier to collect taxes, making withholding taxes a significant portion of total direct tax revenue.
In 2023-24, Rs2,740.10 billion was collected under withholding taxes against a total direct tax collection of Rs4,530.70 billion, constituting 60.47 percent of total direct taxes.
The report noted that among the ten major components of withholding tax, items such as contractual receipts, exports, bank interest, and other payments fall under minimum tax or final tax regimes. While these collections are indirect in nature, the Federal Board of Revenue (FBR) has been reporting them as direct taxes.
Additionally, collections from telephone bills and property purchases were adjustable, but adjustments were not claimed by non-filers.
FBR collected Rs1,650.75 billion under these specific heads during 2023-24, marking an increase of Rs429.69 billion from the previous fiscal year, largely due to higher salaries in the tax brackets, the AGP report added.
