Written by Hamza Shahnawaz Audit says weak monitoring of withholding agents led to under-deduction of income tax from employees’ salaries ISLAMABAD: The Federal Board of Revenue (FBR) failed to recover Rs3.116 billion in income tax on salary payments due to incorrect tax deductions by employers, according to the latest audit report of the Auditor General of Pakistan (AGP). The audit report found that inadequate monitoring of withholding agents allowed employers to under-deduct income tax from employees’ salaries, resulting in significant revenue losses in violation of the Income Tax Ordinance, 2001. Weak Monitoring Led to Revenue Loss Under Section 149, read with Section 161 of the Income Tax Ordinance, every employer is required to deduct income tax from salary payments at the applicable average rate and deposit it into the government treasury. Where tax is not deducted or deposited correctly, the Commissioner Inland Revenue is authorised to initiate recovery proceedings. The AGP examined the financial years 2022-23 and 2023-24 and found that 495 withholding agents across 12 FBR field offices had failed to deduct the correct amount of income tax from employees’ salaries. According to the report, the FBR did not effectively monitor these withholding agents or prevent the short deduction of tax, resulting in the non-realisation of Rs3.116 billion in government revenue. The audit observations were raised between February and November 2024. Legal Proceedings Yet to Be Finalised In its response,…