LAHORE, June 24: Water and Power Development Authority (Wapda) on Tuesday expressed its resentment over what it termed the government’s attempt to “use it as a tax collecting agent, tarnish its image and create price distortions in the economy.”

In a letter to the ministry, the authority cited and berated the latest bid by the government in this regards. The government had increased the limit of withholding tax from Rs1,000 to Rs2,000 for industrial and trading concerns in the recent budget. The letter maintained that the amount of the withholding tax has seen a steady increase during the last few years.

It used to be Rs360 in mid-nineties and later revised to Rs720, then to Rs1,000 and now Rs2,000. The authority had been collecting Rs2.8 billion till last year. Now, the collection will increase phenomenally with the doubling of the amount.

All this collection will be made through Wapda, which will get bad name for nothing as price of electricity is already sky high. In addition to that, the imposition of increased withholding tax would increase price distortions. Since all small industrialists are not in tax net, they would not be able to recover the tax in their annual returns.

So, they would naturally try to recover the same through price increase because it is an indirect tax.

The government’s bid to broaden the tax net could only respected. But it should done through the departments concerned and through direct taxation, rather than such indirect attempt.

Direct taxes could be recovered through efficiency gains, but indirect taxes are passed on to the consumers by the industrialists, it said.

Slabs of withholding tax have also been increased to 12 against 9 previous ones. For the amount of electricity bill between Rs1500 to 10,000, rates have been reduced marginally. But tax on bills exceeding Rs15,000 have been increased phenomenally.

The trading and industrial concerns falling in the categories will have to pay about 50 to 100 per cent more tax. This would certainly generate unrest and resentment among the consumers, it said.

The letter also claimed that the authority was also being discriminated against viz-a-viz other utilities. For example, telephone subscribers pay only Rs300 under the withholding tax head and the Sui Gas distribution companies have been totally exempted from this kind of tax. It is only Wapda which was being used to collect tax and bring bad name to it. The government official expected around Rs5 billion tax collection for the next year.

Consumers would not differentiate between the bill and the tax collection and take bill as one unit and blame Wapda for inflation.

The departments concerned, instead of ensuring due taxes from the potential payees, have found it more convenient to collect taxes through withholding tax regime at cost of Wapda’s image.

This kind of collection is also counter-productive for the economy and failing Wapda in achieving its targets for growth of electricity in industrial sector, it concluded.