The Large Taxpayers Office (LTO) in Karachi has emerged as a champion of tax collection, generating a staggering Rs 4 billion in just ten months (July 2023 – April 2024) by taxing foreign debit and credit card payments.
Effective Tax Administration:
This accomplishment highlights the LTO’s effectiveness as the leading revenue collection entity for the Federal Board of Revenue (FBR). The tax is levied under Section 236Y of the Income Tax Ordinance, 2001, targeting advance tax on funds sent abroad using cards.
Tiered Tax Rates:
The tax rate varies depending on the taxpayer’s status. Individuals registered on the Active Taxpayers List (ATL) enjoy a lower rate of 5%, while those not registered face a steeper 10% tax on their foreign transactions. This system incentivizes registration and compliance while ensuring fair tax collection.
Boosting National Revenue:
The tax on foreign card payments has become a significant revenue stream for the FBR, contributing substantially to the national treasury. The LTO’s strategy strengthens Pakistan’s fiscal health through efficient tax enforcement.
Digital Finance on the Rise:
The Rs. 4 billion collected reflects not only the volume of foreign transactions by Pakistani residents but also the growing reliance on digital payments for international expenses. This trend aligns with the shift towards digital finance, which tax authorities are leveraging to bolster revenue collection.
Expanding the Tax Net:
LTO Karachi’s proactive approach to tracking and taxing foreign card payments demonstrates their commitment to expanding the tax base and maximizing revenue generation. This initiative ensures that the country’s tax framework remains adaptable to evolving financial behaviors and technological advancements.
A Success Story:
The LTO Karachi’s success in collecting Rs 4 billion in withholding tax underscores their strategic efficiency and their critical role in supporting Pakistan’s economic infrastructure. This initiative paves the way for a more robust and adaptable tax system in the face of a changing economic landscape.
Looking Ahead:
The FBR and LTO Karachi are expected to continue refining their strategies to further improve tax compliance and collection. Stakeholders in the financial sector and taxpayers should stay informed about these regulations to ensure smooth and compliant transactions.
