LAHORE/islamabad - The imposition of tax on all banking transactions has caused unrest among the business community, as the All Pakistan Business Forum (APBF), The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Lahore Chambers of Commerce and Industry (LCCI) and All Pakistan Anjuman-e-Tajiran (APAT) have unanimously asked the government to withdraw tax on banking transactions immediately otherwise businessmen would be left with no other option but to close down their operations. They said that instead of taking such measures, government should bring the untaxed sectors into the tax net.

Responding to the Senate’s recent decision to impose a new 0.6 per cent withholding tax on all banking instruments, valued at over Rs.50,000, APBF President Ibrahim Qureshi criticized this new tax as an unnecessary burden, which will be very detrimental for the already weak business and trade activity in the country.

APBF President Ibrahim Qureshi said that it would surely hike up inflation by increasing the operational costs of business communities and the small industry, who are already suffering great hurdles.

Recently, the Senate’s Standing Committee on Finance and Revenue has supported the imposition of 0.6 percent withholding tax on all banking instruments valued at over Rs.50,000, for non-filers of returns. The committee discussed the federal budget 2015-16 and agreed to impose a 0.3% tax on all banking transactions for tax filers and 0.6% for non-filers over Rs.50,000 per transaction. Besides cash withdrawals, these tax rates would be applicable on demand draft, pay orders, SDRs, CDRs, STDR, call deposit receipt and RTCs.

IHA director Sardar Usman Ghani demanded the federal government to refrain from imposing this withholding tax and work towards providing relief to the industry and ultimately to the common man. Statistics show that only 791,000 individuals filed their tax returns in FY14, out of a population of 180 million people in Pakistan. This shows a really dismal picture, however it does not mean that the government can flog the poor man to pay for the rich man’s offenses. The government on one hand proclaims to be aware of the poor man’s plight and pledges to make every effort to control inflation, but on the other hand it is imposing such harsh new levies. Several trade associations and the business community are contemplating a protest strike on 7th July, 2015, against such unfair taxation.

The Federation of Pakistan Chambers of Commerce & Industry (FPPCI) Regional Chairman FPCCI Kh Zarar Kaleem said that it was forced to conduct its monetary transactions through the banking system on account of dangers involved in cash handling due to the law and order situation but was being asked to pay tax merely for doing so. Zarar Kaleem said that the representatives of traders and industry have opposed the government’s decision of taxing all the banking transactions as it may lead to promoting the culture of cash dealing, usage of non-banking channels besides hitting hard the genuine businesses.

The Lahore Chamber of Commerce & Industry will take up imposition of tax on bank transactions with the government. In a statement issued here, the LCCI President Ijaz A. Mumtaz said that the Finance Minister Ishaq Dar would be convinced for the withdrawal of this new imposition that hit the businesses badly.

APAT President Ashraf Bhatti said that if tax on all bank transactions is imposed forcefully, it would not only hamper the trade and economic activities but would also tarnish the image of the government. He said that imposition of this tax would force business community to conduct its monetary transactions in cash that would promote the undocumented economy.

In Islamabad, the local business community has called upon the government to immediately withdraw the imposition of 0.6% withholding tax from 1st July 2015 on all banking transactions for non-filers as it would discourage banking transactions, promote non-banking & cash transactions and would lead to harmful consequences for the economy.

Muzzamil Hussain Sabri, President, Islamabad Chamber of Commerce and Industry said that the government has imposed advance adjustable income tax @ 0.6% on all banking transactions of over Rs.50, 000/- in a day for non-filers in a bid to compel them to become filers. However, he apprehended that this decision will lead to many complications in the economy as it would cause drop in bank deposits, promote the culture of cash transactions, affect the profit margins of taxpaying businessmen and enhance turnover tax for filers.

He said the increased reliance of the government on withholding taxes could become counterproductive as it would further incentivize non-filers to conduct cash transactions and promote informal economy in the country. He said the imposition of this tax would also give rise to inflation as non-filers would pass on its burden to the common man who will have to pay high prices on purchases.

He said that almost the whole business community of the country has strongly opposed this new tax and government should seriously consider its urgent withdrawal to avoid any disturbance to the business and economic activities.

Muzzamil Hussain Sabri said the levy of 0.6% withholding tax on non-filers would also affect the objective of financial inclusion. He said the government was already charging 0.3 percent withholding tax from banks on the transactions of Rs.50,000/- and now the imposition of 0.6 % tax on non-filers would push many businessmen towards the informal economy.

He termed it unfortunate that government did not take business community on board before imposition of this new tax and stressed that it should shun the practice of taking unilateral decisions as such decisions could prove detrimental for promoting documented economy.