Wielding unbridled authority in the powerful offices for years, the government ministers and senior officials suffer from a kind of wild and extreme paranoia, which leads them to expect from everyone to bow their heads before their lordship. The decision to impose withholding tax on bank transaction is not an exception as Finance Minister Ishaq Dar and his Finance Ministry officials are not ready to withdraw their decision. Enhancement of tax net is the need of the hour, but given the level of corruption and mismanagement in the country, no one can make any progress without hobnobbing with the people at the helm of affairs. Therefore, unofficial ‘coordination’ of a businessman with the official concerned is more important than following the set rules and regulations in a particular environment.
There are no two opinions that the tax to GDP ratio is very low in the country, but instead of devising a long term mechanical formulation, the government has opted for hammering out a solution by authority it enjoys in the office. As a result, the bank deposits are decreased by Rs 70 billion in two months and more damage is in the offing. If the issue is allowed to linger on, it will put the entire banking industry in jeopardy. The small business community is already wary of the official machinery which haunts them on one pretext or the other and bank transaction will open up the secrecy maintained by them to save their skin. In the present situation, the government will not be able to document the economy while an exercise to enhance tax base will also be backfired.
The government ministries should avoid expecting compliance through royal decrees in this age of science and technology but have to devise a mechanism to achieve the desired goals. The government should also not make the issue as matter of prestige and respect the people’s mandate who have brought them to power. Currently, 70 percent revenue is collected through withholding taxes, at least Rs 200 billion from importers. If businessmen are in trouble, the economy will be in trouble. Traders and businessmen are holding protest demonstrations to press for their demands, the finance minister should listen to their problems and remove their fears. The current method of deduction of bank transaction does not differentiate between a common man and a businessman. If a person sells his house to buy or construct a new house, he will also have to pay withholding tax. The best way is the compulsory registration of businesses with respective chamber of commerce and industry and the chamber must collect a specific annual fee to deposit it with the government agency.