LAHORE

Traders have started bypassing the banking tools of money transfer by transacting their money mainly through hawala and hundi system to avoid payment of 0.3 per cent WHT imposed by the government in July this year.

Trade bodies and banking officials claim that the banking transactions volume in banks located in major business centres has decreased significantly. But they are unwilling to share the relevant data to show the exact amount of financial loss caused to the national exchequer and the banking industry through this tax evasion.

The traders who are non-filers are now mostly making their payments in cash and hired the security guards, installing safes in their shops or offices. In this way, they are expending more than 0.3 or 0.6 per cent on their money transfers, however they are successful to remain out of tax net.

A dealer said that traders have installed coffers in their godowns where they keep money and make payments in cash avoiding banking channels. They have also started preferably dealing in highest denomination currency notes of Rs5000 notes to easily handle the amount.

A banking official said that not a significant change in volume of money transactions has been seen in major branches of the banks but the banks located in wholesale markets have been affected considerably. He said that around five commercial banks are operating on Mcloed Road which deal with auto spare parts markets of Montgomery Road, Mcloed Road and Hall Road electronic markets. “Our daily transaction has reduced to around Rs5 million from earlier amount of over Rs10-15 million on average daily. An official who works at a branch of United Bank located on Mcloed Road, said that the traders while selling their goods make payment mostly in cash, beside using parchi system. “When they book their consignment in other cities like Karachi, they adopt hawala system for payment and in most of the cases they transfer money through hundi. By adopting hundi system though they do pay money to the money dealers but it is surety their business will be safe from documentation.”

Another official of Alfalah Bank said that his bank branch, also located in a renowned commercial centre, collected more than Rs5 million on the first day after the imposition of 0.6 percent WHT on banking transactions.

“The traders, at once, stopped using banks for their money transactions, resultantly money transactions of commercial bank branches operating in the commercial market hubs of the country fallen by at least 50 per cent after imposition of the withholding tax.”

Another banking official said that business of bank branches operating in Akabari Mandi, Circular Road, Montgumry Road, Mcload Road, Suha bazaar, Loha Market and Lnada Bazaar have been affected largely after implementation of 0.3 percent tax deduction.

Banking officials said the traders first started withdrawing their deposits and then stopped issuing banking instruments for dealing with buyers and sellers, including cheques, online transfers, demand drafts, pay orders and others. Now they are preferably doing business on cash or through hawala. They said that Karachi head-offices of the commercial banks, facing reduction in their business volume, have taken notice of the decline in transactions, especially in wholesale markets.

An auto parts dealer who runs his shop with the name of Majid Autos, said that usually his suppliers demand money payment though banking online system. But after the imposition of WHT, the suppliers personally visit to his shop and collect money. The suppliers go on the round of the whole retail markets and collect payments which mount to in millions.

The manager operation at Tample road branch of HBL said that they usually deal with retailers who have now started withdrawing money in quantity of less than Rs50,000 which does not come in the tax limit. He said their business has not been affected so much however, their customers have become conscious and try to make transaction of below Rs50,000.

FPCCI Regional Chairman Kh Zarrar Kalim said that markets are only doing those transactions through banking channels which are unavoidable. He said remaining transactions are being made on cash and hawala or hundi. He said tax is even being deducted from filers which is compelling them to adopt undocumented channels due to poor refund mechanism in the FBR. He said the traders will continue boycotting business deals through banking transactions until withholding tax is revoked.

APAT president Khalid Pervaiz said that this tax is not only decreasing the economic activity but also encouraging people to handle all their transactions in cash. He said out of five branches of commercial banks in Urdu Bazar, only two are currently doing some transactions. No trader is now depositing his money in the accounts, rather only withdrawal is continuing by the account holders.

Chairman PIAF Irfan Iqbal Shiekh said business turnover and volume of trade has been badly restricted due to traders strike and also creating negatively impacting the economic activity and national economy.