ISLAMABAD - The government, which is already planning to levy additional taxes worth Rs40 billion, will face another Rs20 billion revenue shortfall due to the concessionary rate of withholding tax on banking transactions.

Traders’ countrywide strikes in July and August forced the Finance Ministry to cut the rate of WHT from 0.6 to 0.3 per cent, leading Federal Board of Revenue Chairman Nisar Khan to revise down the revenue forecast to Rs18 billion from budgetary estimates of Rs38 billion.

The government in budget (2015-16) imposed 0.6pc WHT on banking transactions for non-filers with an aim to generate Rs38 billion and bring non-tax filers into tax net during ongoing financial year. However, later, the rate of WHT was brought down to 0.3pc after traders observed countrywide strikes.

Finance Minister Ishaq Dar informed the National Assembly Standing Committee on Finance that WHT has helped in broadening of tax base of the country, as additional 1,00,000 non-filers filed their tax returns since July. The overall numbers of tax filers have swelled to one million this year from 0.7 million of June 2013. It would be big achievement if 4 to 5 million traders come into tax net, as business community claims that 12 million traders are affected due to WHT.

He hinted that government might extend the time period for concessionary WHT.

Dar said that government had imposed a deliberately higher WHT knowing that it might have to offer concession in the rate to bring a maximum number of non-filers into the tax net. Traders may also face a new separate fixed tax set at a rate that will vary between the cities. “We are also considering introducing fixed amount of tax for different for the traders, which means there would be different rate of minimum tax to pay in the cities”, he added.

Finance minister rejected the speculations that Pakistan’s currency is overvalued and that it should be depreciated. “I am still saying rupee is undervalued”. Without naming International Monetary Fund, he said: I argued with them (IMF) that there is no need of devaluation of the currency. IMF believed that Pakistani rupee should be depreciated by 5-10 percent.

Dar said that the import of luxury items has increased, offsetting the impact of the declining oil prices in international market. The government had planned to save $3-4 billion due to lower prices of petroleum products.

The government is working on out of box solution to permanently resolve the tax refunds issue, he said. Finance Minister said Pakistan would receive $950 million already approved by the World Bank, Asian Development Bank and Japan for the energy sector within this month, which would further increase the country’s reserves.

Chairman FBR informed the committee that they had paid Rs22.5 billion tax refunds during July to October this year as against Rs16.1 billion in the corresponding period last year, showing an increase of 13 percent.

The National Assembly’s Standing Committee on Finance also discussed the Farmers Package announced by Prime Minister Nawaz Sharif on September 15. The lawmakers of treasury and opposition parties showed serious concerns over the slow pace in implementing the package. “The government has so far reduced the prices of fertilizers only but neither interest rate on loans nor tax on solar tube wells decreased”, said MNA Ajmal Rao.

A Finance Ministry official informed the committee that overall volume of the package is Rs341 billion.