ISLAMABAD - Finance Minister Ishaq Dar on Monday took notice of business community’s reservations over the recently imposed 0.6 percent withholding tax on all the banking transactions in the budget 2015-2016.

The finance minister invited the business community and Federal Board of Revenue on Wednesday to address the issue of imposing withholding tax on banking transactions. He said the government wants to resolve the issue through negotiations.

The government had imposed an adjustable advance income tax at the rate of 0.6pc of the amount of transaction on all banking instruments and other modes of transfer of funds through banks in the case of persons who do not file income tax returns in the budget 2015-2016. Later, on the recommendations of the Senate Standing Committee on Finance, the government agreed to fix minimum threshold of Rs 50,000 for charging 0.6 percent withholding tax on the amount of transaction to be collected on all banking instruments and other modes of transfer of funds through banks for non-tax filers.

The government had estimated to generate Rs 34 to Rs 38 billion through this measure during the ongoing financial year 2015-2016. The government had taken this step in a bid to broaden the tax base of the country by bringing non-taxpayers into the tax net.

However, the government’s decision united the business community across the country and they threatened to close their businesses against it. The businessmen from Islamabad, Lahore, Karachi, Faisalabad and other cities strongly opposed the government’s decision.

The Islamabad Chamber of Commerce and Industry (ICCI) called upon the government to immediately withdraw the imposition of 0.6% withholding tax from July 1, 2015, on all banking transactions for non-filers as it would discourage banking transactions, promote non-banking and cash transactions and would be harmful for the economy.

Muzzamil Hussain Sabri, president, Islamabad Chamber of Commerce and Industry, said the government had imposed advance adjustable income tax at the rate of 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.

Similarly, other chambers and forums also protested against the decision. All Pakistan Business Forum (APBF), Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Lahore Chambers of Commerce and Industry (LCCI) and All Pakistan Anjuman-e-Tajiran (APAT) 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, the government should bring the untaxed sectors into the tax net.

Monitoring Desk adds from Lahore: Punjab Chief Minister Shahbaz Sharif also came into action as traders threatened to go on strike over 0.6% withholding tax on bank transactions. Shahbaz Sharif contacted Ishaq Dar who called a meeting of traders and Federal Board of Revenue (FBR) officials on Wednesday.

Expressing concern over imposition of tax on bank transactions, traders had announced to protest on Tuesday in Lahore and various other cities of the country. The Punjab CM contacted Ishaq Dar immediately and informed him of traders’ concerns.

Ishaq Dar will meet a delegation of traders on Wednesday in Islamabad upon the Punjab CM’s advice. The meeting will also be attended by FBR officials. Traders’ concerns will be sympathetically considered at this meeting.