Banks are the integral part of modern economy and any restrictions in the system can have disastrous effects on the financial order. Businessmen use banks transactions to avoid the handling of hard currency due to security reasons. However, whizz-kids in the government always come with a novel way to extract money from people on one pretext or the other and the latest move of the government to tax every bank transaction is being seen in this context.
The business community across the board is critical of the imposition of withholding tax on transactions of over Rs 50,000 and has urged the government to withdraw it immediately. Various business and trade organisations have already planned to go on strike to protest against the government move. The stakeholders in the business and trade opine that deduction of 0.6 percent as withholding tax on transaction of over Rs 50,000, through commercial banks, will prove to be disastrous for the economy of the country. According to Fuad Ishaq, the president of the Khyber Pakhtunkhwa Chamber of Commerce and Industry, instead of taking measures to broaden the tax net, the government is putting taxpayers and non-tax payers in same category.
The representatives of Ghee and Cooking Oil Manufacturing Association, PVS Pipe Manufacturing Association, Petroleum Dealers Association, CNG Association, Fresh Fruit and Vegetable Association, Flour Mills Association and various other trade organisations have rejected the imposition of withholding tax on transactions through cross cheques, pay-order and demand draft in the commercial banks and are demanding Finance Minister Ishaq Dar to immediately withdraw the decision. The KPCCI president said that the ministry of finance should remove existing difference between income tax section 236P and Section 231A.
Previous year, the government had enhanced transfer fee on vehicles which resulted in huge loss to the excise and taxation department across the country. The government has reversed this decision this fiscal year. Imposition of withholding tax will add to the operational costs of business communities and as a result inflation will increase. Energy crisis, terrorism and corruption have already been haunting businesses in Pakistan and the latest move will add fuel to fire. The government should give incentives to the business community and improve banking system to attract foreign investors. But the latest government move will not only discourage foreign investment, but will also push the local investors to take their capital abroad. The government will have to curtail electricity cost to encourage small industries to expand. According to the latest statistics, only 791,000 individuals filed their tax returns in FY14 out of a population of 180 million in Pakistan.
