This sector is already paying a huge amount of taxes in various shapes and forms.
KARACHI: While announcing the provincial budget for 2013-14, the Government of Sindh has proposed a sales tax of 10 per cent on services being rendered by private security agencies. It may be noted that private security companies are already paying a large amount in direct and indirect taxes and hence, imposition of additional sales tax would amount to being the last straw on the camel’s back. Any additional tax imposed on them would not only be unjustifiable but also result in eliminating this vital and essential service by making it financially unviable.
Private security companies employ a large number of skilled as well as unskilled personnel, thus reducing unemployment and poverty. They act as a solid support to the government by providing security to business houses, banks, vital installations and a host of other organisations. We act as a fourth tier of security, after the armed forces, paramilitary forces and the police in the maintenance of a peaceful environment.
Unlike any other service, with which private security has been bracketed for levying of sales tax, this sector is already paying a huge amount of taxes in various shapes and forms. Contrary to the general conception, companies in this sector are already doing whatever they can to remain financially afloat. A private security company pays: Rs200,000 for each province in registration fee; Rs25,000-50,000 per province in annual renewal fee; Rs4000 per arms licence in initial fees, followed by Rs500 per licence in annual renewal fee; around 18 per cent of income as income tax, SESSI, EOBI, education cess, Rs 0,000-100,000 as professional tax and a large fee for acquiring a wireless frequency.
While these are mostly direct taxes and are being paid regularly to the government, private security companies also pay GST and while purchasing uniforms, weapons, ammunition, wireless equipment, communication equipment, vehicles and other security-related items. According to an informed estimate, this sector pays over Rs500 million in income tax every year.
If the various taxes already being paid by the private security companies are added up to the cost of weapons, vehicles, uniforms, wireless and communication equipment along with running expenses like salaries, training costs, insurance, daily maintenance and bonuses, it becomes very difficult for proprietors to make a profit.
At present, around 300,000 able persons are employed by private security companies all over the country. In addition, their family members, running into hundreds of thousands, are linked with this sector. Imposition of the proposed sales tax on private security services could impact the daily lives of all these people because many companies will have no choice but to shut down. This will result in not only thousands of people becoming jobless but also cause extra burden on the government since it will have to raise a larger police force to compensate for the shortage.
I would say that the government must, in fact, encourage this service to flourish so that it can continue supplementing the law-enforcement agencies in the maintenance of peace and public order. It is strongly recommended that no sales tax be levied on private security firms.
Nisar Sarwar
Chairman, All Pakistan Security Agencies Association
Published in The Express Tribune, June 24th, 2013.
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