Businessmen call for withdrawal of 0.6% withholding tax on banking transactions

  • July 04, 2015
The local business community has called upon the government to immediately withdraw the imposition of 0.6% withholding tax from 1st July 2015 on all banking transactions for non-filers as it would discourage banking transactions, promote non-banking & cash transactions and would lead to harmful consequences for the economy. 
 
Muzzamil Hussain Sabri, President, Islamabad Chamber of Commerce and Industry said that the government has imposed advance adjustable income tax @ 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. 
 
He said the increased reliance of the government on withholding taxes could become counterproductive as it would further incentivize non-filers to conduct cash transactions and promote informal economy in the country. He said the imposition of this tax would also give rise to inflation as non-filers would pass on its burden to the common man who will have to pay high prices on purchases.
 
He said that almost the whole business community of the country has strongly opposed this new tax and government should seriously consider its urgent withdrawal to avoid any disturbance to the business and economic activities. 
 
Muzzamil Hussain Sabri said the levy of 0.6% withholding tax on non-filers would also affect the objective of financial inclusion. He said the government was already charging 0.3 percent withholding tax from banks on the transactions of Rs.50,000/- and now the imposition of 0.6 % tax on non-filers would push many businessmen towards the informal economy.
 
He termed it unfortunate that government did not take business community on board before imposition of this new tax and stressed that it should shun the practice of taking unilateral decisions as such decisions could prove detrimental for promoting documented economy.