Pakistan targets banks and corporations for advance tax collection

Pakistan’s tax collection authority — Federal Board of Revenue (FBR) — has geared up to collect advance tax, primarily from banks and corporate entities, and will start issuing tax demand notices before September 15.

In case of non-payment, bank accounts might be attached and advance tax payments recovered, sources informed Nukta.

The tax authority aims to collect over PKR 400 billion in advance tax during the first quarter of the current fiscal year compared to PKR 357 billion in the first quarter of fiscal year 2023-24.

FBR collects advance tax from banks, companies, or individuals to raise revenue. Most income tax collections are considered advance tax, and are adjustable.

The FBR has instructed its 25 field formations to focus on collecting advance tax from 10 major companies to meet the revenue target of PKR 1.111 trillion for this quarter.

To avoid a mini-budget as agreed with the International Monetary Fund (IMF), the FBR needs to collect PKR 2.652 trillion from July to September. However, the tax department only collected PKR 1.456 trillion in the first two months, missing the target by PKR 98 billion.

Large Taxpayers Offices (LTOs) are allegedly pressuring banks to pay an extra installment of advance tax for October along with the September installment to meet revenue targets. Additionally, the FBR's field formations have informed corporate entities to make their first advance tax payment by Sept 15.

Under Section 147 of the Income Tax Ordinance 2001, corporate entities are required to pay advance tax quarterly. However, sources claim that the FBR is inflating tax demands to collect higher amounts of advance tax from the corporate sector to boost revenue numbers.

FBR had discontinued the advance tax collection policy in fiscal year 2020-21 under Dr. Ashfaq Ahmed's tenure as chairman. However, subsequent chairmen, including Amjad Zubair Tiwana and Rashid Langrial, reintroduced the policy.