ISLAMABAD

The government has refused to bow down to the pressure of the traders over the withholding tax on the banking transactions, saying this tax could not be withdrawn at any cost.
“We are not considering to withdraw the withholding tax on the banking transactions”, said Shahid Hussain Asad, Senior Member (Inland Revenue) Policy and official spokesperson of FBR. He told The Nation that withholding tax would be restored to 0.6 percent from October 2015 from existing 0.3 percent as per agreement with the traders’ bodies.
The All Pakistan Anjuman-e-Tajran on last Saturday has announced another countrywide strike against withholding tax on September 9. Under the new plan, the traders would hold protest on September 2 across the country whereas, on September 4 they would observe boycott of banks and after that they would pull their shutter down across the country on September 9. They said that in case of non-acceptance of demands, then again shutter down strike would be observed on October 7.
This would not be for the first time that traders would go on strike over controversial tax, as they already observed strikes on August 1 and August 5.
The government and business community in July this year struck an agreement to reduce the withholding tax on banking transactions to 0.3 percent from 0.6 percent. The government under the agreement gave an opportunity to those businessmen who were non-filers to become filers in the three months (July to September).
However, majority of the traders of the country refused to accept the agreement, as they want to completely withdraw the withholding tax. Sources in Finance Ministry informed that government could not withdraw this tax, as it was the major revenue generation measures in the budget 2015-16.
The government had estimated to generate Rs35 billion from the withholding tax on banking transactions during ongoing financial year. “The withholding tax on banking transactions was imposed not only to generate revenue but to bring numbers of non-tax filers into tax net”, said another official of the FBR wishing not to be named. He further said that Pakistan had also assured the International Monetary Fund (IMF) to maintain the withholding tax on banking transactions, as it is helping in bringing non-tax payers in to the tax net.
The IMF is continuously asking Pakistan to broaden its extremely low tax base of the country, as only 900,000 file their income tax returns out of the country’s population of 180 million.
The FBR official informed that government could give some kind of relief to the protesting traders by enhancing the minimum threshold for withholding tax. He further said that government is contemplating to increase the minimum threshold for withholding tax on the cash withdrawal from the banks to Rs100,000 from exiting Rs50,000. Meanwhile, the minimum threshold on other banking instruments including cash demand draft, pay order, special deposit receipt; short term deposit receipt, call deposit receipt, rupee traveler’s cheque could enhance to Rs500,000 from existing Rs50,000, he added.
He concluded by saying that government is not in position to withdraw the withholding on banking transactions, as it would give positive results in the upcoming months.