GROUP MEMBERSSaadia Khalid (13-E)

Muneeza Mohsin (39-E)

Afshan Javed (51-E)

WORKERS WELFARE TAX

• Welfare tax is a direct tax.

• It is levied on Industrial Establishments

• In the previous budget (2009-2010), the contribution of welfare tax was 15600 million rupees.

Contribution of Welfare Tax in Budgets of Different Years

2008-2009 2009-2010 2010-20110

500010000150002000025000

WORKERS WELFARE TAX (in million rupees)

WORKERS WELFARE FUND ORDINANCE, 1971

SECTION 1

INTRODUCTION

The ordinance that discusses Workers Welfare Fund is known as “Workers Welfare Fund Ordinance, 1971”

It is applicable to the whole of Pakistan

SECTION 2

DEFINITIONS

ACT: Act means Income Tax Act, 1922.

FUND:The term fund means Workers Welfare Fund.

INDUSTRIAL ESTABLISHMENT: It is important to know this definition because it is the establishment who has to make contributions in the fund.

•Any factory, workshop or business where goods or articles are produced with the help of electrical, mechanical, thermal or nuclear energy.

INDUSTRIAL ESTABLISHMENT

•Business where goods are produced using animal energy or human energy will not be included in this definition.

•It includes any concern working in a mine, quarry, or oilfield.

•Any concern involved in the carriage of goods and men (example, shipping corporations)

•Any business involved in the activity of growing tea, coffee, rubber or cinchona

•Any organization declared to be an “industrial establishment” by the Federal Government in the Official Gazette.

INDUSTRIAL ESTABLISHMENT

Following are NOT industrial establishments:

• Any concern owned by the government• Any corporation owned by a corporation which

established by the government• Any corporation whose majority shares are with the

government.

Any person who isappointed as an Incometax officer under IncomeTax Act, 1922 will be theincome tax officer

INCOME TAX OFFICER

– A person or a body of persons which employs workmen in an establishment under contract of employment

– Under the Ordinance, employer also includes people who are responsible for management, supervision and control of the establishment.

EMPLOYER

All officers and employees of Federal Government, Provincial Government, Local Government who are working as supervisors, managers, secretary and directors are also employers.

Worker • Generally, worker is a person who works at a

particular occupation or activity or any personwho does manual or industrial labor

• Under this ordinance it is defined as “a person who does not fall within the definition of an employer and who is employed in the establishment for hire or for reward.”

However the definition of “worker” or “workmen” does not include an employee who is employed for performing managerial or administrative activities.

SECTION 3

CONSTITUTION OF WORKERS WELFARE FUND

CONSTITUTION OF WORKERS WELFARE FUND

This Fund will comprise of:• An initial contribution of TEN CRORE

RUPEES by Federal Government

• The money paid by industrial establishments

• Voluntary contribution in the shape of land, building or in the form money by Government or any other person.

This Fund will comprise of:

– Incomes from loans raised by Governing Body– Income generated from various investments.

CONSTITUTION OF WORKERS WELFARE FUND

SECTION 4 & 5

WHO WILL PAY TAX?WHAT AMOUNT WILL BE PAID?

WHO WILL COLLECT IT?

WHO IS LIABLE TO PAY TAX??

• If the annual income of the industrial establishment is more than or equal to 500,000 rupees, then it shall be liable to pay this tax.

• Welfare tax rate = 2%

Suppose the income of an industrial establishment is 6,60,000 rupees

Will this organization pay welfare tax?If yes, then what is the amount of tax to be paid?

EXAMPLE

The amount of welfare tax to be paid bythe establishment will be

Rs 13,200 ( = 6600000 *0.02)

RESPONSIBILITY OF COLLECTION

• No separate department is established for collection of welfare tax.

• Income tax department collects the amount.

• Later income tax department transfers it to the Workers Welfare Fund.

ASSESSMENT BY TAX OFFICER

• Although it is the responsibility of the Establishment to file the return and make payment but the Income Tax Officer will also make assessment of the total amount on which tax for welfare purpose is paid.

• Incase any excess amount has been paid, it will be refunded

• In case less amount has been paid, then the establishment will have to pay the due amount.

• However, the industrial establishment can go for appeal and reveal.

TIME OF PAYMENT

The amount to be given in the fund must be paid on or before the date on which it is requires to furnish the return for income tax.

LATE PAYMENT CHARGES

• If the establishment does not pay the amount within the due date, then it shall have to pay late payment charges.

• This means an additional amount of 8% per annum of the due amount.

EXAMPLE

Lets suppose that the total income of the establishment is 1 Mrupees. Further assume that the return must be filed andpayment must be made till September 15, 2010. But theorganization delayed the payment and paid the amount on 15th

October. In this case the total liability will be:Contribution to be made in the Fund (1000000 @ 2%) …………………………………………… 200000ADD: Late payment charges [200000 * 0.08 * (30/365)] ……………….…………… 1315TOTAL LIABILITY …………..……………………………….. 201315

SECTION 6

PURPOSE OF FUND

PURPOSE OF THE FUND

The money in the fund is used for thefollowing purposes:

• For financing of projects connected with the establishment of housing estates.

• For construction of houses for workers.

• Houses are given on rent to workers

PURPOSE OF THE FUND

• For financing of other measures for welfare of workers

• For meeting expenditure in respect of administration of the Fund

• For repayment of loans raised by the governing body, and

• For making investment on securities.

August 2010: The Pakistan government is considering to divert the Rs15.6 billion proceeds of the Workers Welfare

Tax to the flood-affected areas

SECTION 7, 8, 9 & 10

GOVERNING BODY&

FUNCTIONS OF GOVERNING BODY

GOVERNING BODY• The governing body is basically a body or group of people

who are responsible for the management and administration of the fund.

• This body consists of 18 members maximum. The chairman of this body is the secretary of Labor Welfare of Pakistan. Among the members it is compulsory that one member should be appointed from each province. Moreover this body should constitute of at least one worker and one employer from each province.

FUNCTIONS OF THE GOVERNING BODY

• To formulate the procedure for giving grants.• Allocation of funds for different welfare

activities.• Governing body has to give approval for various

expenditures.• To ensure that the Fund is being managed

effectively.

FUNCTIONS OF THE GOVERNING BODY

• To invest the money of the fund in different market securities so that the money remains in circulation and increases with time. Money can be invested in only those securities that have been approved by the Federal Government.

• To raise loans and take necessary steps for discharge of loans.

SECTION 11

WORKERS WELFARE BOARD

WORKERS WELFARE BOARD

Board called “Workers Welfare Board” iscreated in case a fund is allocated for thefederal or Provincial Government.

BOARD

Chairman 9 Members

At least 2 Employers

At least 2 Workers

These 9 members will

hold office till the date

specified in the terms

and conditions laid

down by the governing

body.

BOARD TO BE A BODY CORPORATE

• The Welfare Board will have perpetual succession and a common seal.

• If the Board wishes to acquire or dispose off any moveable or immovable property it will have to follow the terms and conditions of the Ordinance.

• Office of the Board will be at the place specified by the governing body in the gazette.

• Chairman will be the chief executive and have the power to appoint other staff.

• Decision will be made according to the opinion of majority of the people.

POWERS OF BOARD

Schemes for allotment

Fixation of rent

Power to recover the rent.

To evict any person from the house

Gets its accounts annually audited.

POWERS OF THE BOARD

Recovery of Rent

As told earlier the board has the power to recover the rent by making deductions from the wages of the employees.

Evictions• If the Board asks a person to

vacate a house, he has to vacate it within 2 months of the order.

• If the person fails to vacate the house the Board may lodge a complain with the magistrate.

• If in case the person to whom the house was allocated dies, the house will remain in his occupation even after his death.

SECTION 12: Delegation of Power

The Board may from time to time delegate its power to the secretary.

SECTION 13 Power to reduce the amount due

The federal government can reduce the amount due from the industrial establishment .i.e. can change the amount of 2% that is to be taken

from the industrial establishments having income more than or equal to 5,00,000.

SECTION 14: Protection of Person acting under Ordinance

A person acting under theordinance cannot be sued andno legal prosecutions shall lieagainst him.

SECTION 15: Power to make rules

• The federal government may by notification make rules for the ordinance.

• Rules will be applicable to all persons