Leading exporters: Withholding tax reduced from 3.5 to 1 per cent

Decision taken to make local goods competitive against smuggled ones.

ISLAMABAD:

The government has reduced withholding tax to one per cent from 3.5 per cent on all local supplies made by the textile, carpets, leather, sports and surgical goods sectors in a bid to make them competitive against influx of smuggled goods under the garb of Afghan transit trade.

The decision comes a day after sales tax was reduced from 17 per cent to between four and six per cent on these sectors as the authorities succumbed to the pressure of influential lobbies. The Federal Board of Revenue (FBR) notified the reduction in withholding tax on Saturday.

Withholding tax makes the largest contribution to direct tax collection. A recent FBR report states that 59 per cent of the total direct tax collection during July to December 2010 came in the form of withholding tax.

An FBR spokesman said that one per cent tax will not be refundable and the decision has been taken to make the industry more competitive. He said that the textile sector was the most affected by smuggled goods coming under the garb of Afghanistan Transit Trade Agreement of 1965.

“The decision will not only reduce the cost of doing business but will also benefit end-consumers,” said Tariq Saeed, Vice President Confederation of Asia Pacific Chambers of Commerce and Industry – a grouping of businessmen from 22 countries. The decision was the outcome of talks between the government and the business community, he added.

Income tax amnesty scheme

The government also offered income tax amnesty scheme to those sellers, suppliers and service providers of the five export-oriented sectors who will register with the tax authorities after issuance of this notification. The amnesty scheme has been offered for a period of three months up to June 30.

The government will not seek details of income and past business transactions from those who get themselves registered before June 30.

The government earlier offered the amnesty scheme on sales tax in an attempt to broaden the tax base. Currently, there are 131,000 registered sales tax persons, of which 32,000 are dormant.



Published in The Express Tribune, April 03^rd, 2011.