Pakistan Institute of Development Economics

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Tax Cheating?
P & R Vol.2 Issue 6
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Tax Cheating?

Publication Year : 2021

How many of us set apart some of our earnings for the purpose of fulfilling our tax obligations? We may save for the rainy day but we hardly ever hear of anyone saving to pay the tax authorities! This is the reason why there is such a thing as ‘withholding tax.’ The public in general, considers “withholding tax” as parallel or akin to income tax but something, which is not actually income tax. The fact is that withholding tax at source or collecting tax beforehand is merely a form whereby income tax is bit by bit, taken from the taxpayers. In other words, the concept is that of ‘pay as you earn’ (PAYE) or ‘pay as you spend’ (PAYS). This way one does not have to produce a hefty sum at the time of filing one’s annual tax return. It solves the problem for all those people who are unable to manage their funds diligently thus ending up with no liquidity for discharging actual tax obligation when filing return. This clearly indicates that the aim of withholding is to facilitate taxpayers rather than putting them in a complicated maze of keeping track of innumerable deductions/collections and their consequential implications visà- vis their actual tax liability.