Instead of rectifying this situation, govt has jacked up the withholding tax on profit exceeding Rs500,000 per annum
ISLAMABAD: Savings is considered to be the backbone of every economy, which forms the foundation of growth and investment in a country. It is the main source of credit on which the whole banking industry is based. In an underdeveloped and impoverished country like Pakistan the significance of savings is even more indispensable where people can hardly make their ends meet due to the high cost of living, which results in dismal rates of savings. However instead of encouraging the culture of savings by providing more incentives to depositors, the governments have since forever levied an exorbitant fixed withholding tax of 10% on total profit from savings.
This punitive action on profit from savings, especially for the bigger depositers who are getting more than Rs500,000 profit per annum even if they are non-filers, is beyond comprehension considering that savings is imperative for the economy. The idea of savings needs to be promoted under all circumstances otherwise people will start withdrawing from banks and start investing in other non-revenue generating commodities, triggering runaway inflation. Profit on deposits should be treated by the government as just another form of income for the public.
Instead of rectifying this situation, the government has jacked up the withholding tax on profit exceeding Rs500,000 per annum for compliant tax filers from 10% to 15% in the last budget. On the other hand the withholding tax on profit for non-filers has been hiked from 10% to an outrageous 20%.
The present government is requested to review this injustice and give some relief to the poor depositors by giving them some incentives to survive this high cost of living instead of further penalising them.
Fuad Enver
Published in The Express Tribune, January 30th, 2020.
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