ISLAMABAD
The imposition of withholding tax on banking transactions has started helping government in broadening of the tax base, as around 36,000 people have filed their income tax returns during two and half months (July to September 15).
“As many as 36,000 people have become tax filers since imposition of the withholding tax on banking transactions in the budget,” Shahid Hussain Asad, Senior Member Policy Inland Revenue and official spokesperson for Federal Board of Revenue (FBR) said while talking to The Nation. He further said that number of tax filers would increase with the passage of time.
The withholding tax on banking transactions for the non-filers had also generated Rs4 billion revenue for the national kitty during first couple of months (July and August) of the ongoing financial year 2015-16. The government had projected to generate Rs35 billion from the withholding tax on banking transactions during entire current fiscal year.
“A large number of traders have started filing their income tax returns to avoid withholding tax on the banking transactions, which is imposed only on non-tax filers,” another official of the Federal Board of Revenue said. The government had imposed withholding tax on banking deals to bring non-filers into tax net, which is extremely low in Pakistan as compared to the other countries, he added.
“The withholding tax on banking instruments of non-filers is a documentation measure, which will help in increasing tax to GDP ratio that is only 9.7 percent”, he remarked.
The PML-N government in budget 2015-16 had imposed 0.6 percent withholding tax on banking transactions for non-tax filers. However, traders across the country reacted on the tax by saying government should withdraw the controversial tax. Later, after negotiations, 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. Withholding tax would be restored to 0.6 percent from October 2015 from existing 0.3 percent as per agreement with the traders’ bodies.
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.
Meanwhile, the FBR has also extended the due date of filing withholding tax statement up to September 28 2015. “In exercise of power conferred under section 214A of the Income Tax Ordinance, 2001, the Federal Board of Revenue is pleased to extend the date of filing of Withholding Tax Statements due on 15th August 2015, and 15th September 2015, under the provisions of Section 165 (2) of the Ordinance, to 28th September, 2015,” stated the official circular issued here.