Investigation into Mismanagement of Withholding Taxes on Leased Vehicles: FTO issued Direction to FBR for Systematic Rectification 

Islamabad 24-06-2024: The Federal Tax Ombudsman initiated an own motion investigation under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to address discrepancies in the FBR's management of withholding taxes under Section 231B of the Income Tax Ordinance, 2001, specifically concerning leased vehicles. The investigation revealed that while car manufacturers withhold and deposit taxes in the name of lessors (banks or leasing companies), the financial burden is borne by lessees. This results in incorrect tax credits being allowed to lessors, depriving actual buyers of their due credits and causing double taxation at the time of vehicle registration. 

The findings highlighted inconsistencies in withholding statements and varying treatment of tax credits among banks, indicating maladministration and inefficiencies within the FBR. Recommendations were made for the FBR to implement mechanisms ensuring proper crediting of taxes to lessees' accounts, including mandatory documentation by manufacturers and a digital integration system. Compliance with these recommendations was required within 90 days.

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