To mitigate a potential shortfall in tax collection, the Federal Board of Revenue (FBR) is considering a proposal to increase withholding tax rates by one per cent starting October 1, 2024. This measure is contingent upon a decline in tax revenue for September 2024, as outlined in a report by Business Recorder.
Sources reveal that the FBR has prepared a draft proposal for this tax rate adjustment in response to a possible revenue decrease at the close of the first quarter of the fiscal year 2024-25. Should the FBR not meet the revenue target for September, the proposed increase will be enacted through a supplementary finance bill.
Tax collectors will then be responsible for either meeting the September revenue target or managing the implications of an increased withholding tax rate in October. In the previous fiscal year, 2023-24, withholding taxes constituted over 70% of all direct taxes collected.
Additionally, sources indicated that while the standard sales tax rate remains unchanged, there is also a proposal to hike withholding tax rates by one per cent if the revenue shortfall continues.
The FBR has already encountered a significant revenue shortfall, missing its target by 98 billion rupees in the first two months of fiscal year 2024-25. Net collections totalled 1,456 billion rupees against a target of 1,554 billion rupees.
