Withholding Tax Growth
The Federal Board of Revenue (FBR) achieved a significant milestone during the fiscal year 2023-24 by collecting a total of Rs2.74 trillion in Withholding Taxes (WHT), marking an important boost in revenue generation.
This figure represents a notable increase compared to Rs2.007 trillion collected in the previous fiscal year, reflecting a strong growth rate of 36.5%.
Withholding taxes, a crucial component of Pakistan’s tax system, have shown substantial progress across various sectors, and the FBR’s efficient tax collection efforts have contributed significantly to the nation’s financial stability.
Among the various sources of withholding tax, payments on contracts emerged as the leading contributor, accounting for 18% of the total WHT collection. This category remains the dominant force behind WHT revenues, underscoring its importance in the overall tax framework.
Other major categories of WHT also recorded impressive growth. Notably, withholding tax on dividends saw the highest percentage increase, rising by a remarkable 69.9%.
This surge reflects the rising dividends and payouts, benefiting from Pakistan’s improved corporate performance in various sectors. The tax on Technical Fees also demonstrated strong growth, increasing by 53.6%, while taxes collected from Profit on Debt/Bank Interest & Securities rose by 52.8%.
Additionally, the withholding tax on salaries grew by 39.3%, showing increased tax compliance in the employment sector, and collections from the sale of immovable property grew by 37%, reflecting an active real estate market.
These five major categories, which include contract payments, profit on debt, salaries, dividends, and electricity bills, collectively contributed to 59% of the total WHT collection during the fiscal year.
The share of WHT in Pakistan’s total revenue collection was also noteworthy, constituting 29.47% of the overall revenue collected, which amounted to Rs9.299 trillion. This represents an increase from the previous year’s 28.02%, signifying the growing reliance on withholding taxes as a steady source of revenue for the government.
The FBR’s performance in WHT collection highlights the efficiency of its revenue collection mechanisms and the government’s focus on enhancing tax compliance.
The growth in withholding tax categories such as dividends, salaries, and property transactions further illustrates the expanding tax base and increasing contributions from diverse economic sectors.
As the government continues to refine its tax policies and enforce stricter compliance measures, the role of withholding taxes will likely remain central to Pakistan’s fiscal strategy.
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