Cotton purchase: Govt to scrap withholding tax

Rs105 billion revenues collected in July 2011, 36% more than last year.

Shahbaz Rana August 12, 2011


The government has decided to withdraw 3.5 per cent withholding tax levied on the cotton purchase from growers by ginners besides abolishing the condition of payments to growers through banking channels -- a move that will end the strike in the ginning sector.

The decision was taken during a meeting of the Tax Reforms Coordination Group held under the chairmanship of Finance Minister Dr Abdul Hafeez Sheikh.

The Federal Board of Revenue (FBR) will issue a formal note today for the approval of the finance minister.

FBR Member (Inland Revenue Service) Khawar Khursheed Butt said that under the new arrangement, cotton ginners would pay growers in cash instead of making payments through a bank.

He said that cotton growers faced documentation problems under the previous arrangement.

Butt said that growers would not be liable to 3.5 per cent withholding tax, as ginners were insisting to deduct this amount from cotton payments.

However, he said that ginners would still deduct ten per cent withholding tax on the amount the middlemen took as their commission.

Ginning factories have been on strike against the government’s policy to charge withholding tax and make ginners pay through banking channels. Butt insisted that the move would not affect the government’s drive to broaden the tax base as the agriculture sector was exempted from income tax.

FBR Chairman Salman Siddique also presented during the meeting a strategic plan for revenue collection in the current fiscal year.

The chairman said that the authorities had collected Rs105 billion in taxes in July 2011, which was 36 per cent higher than the amount collected in last year’s corresponding period.

Published in The Express Tribune, August 13th, 2011.


Yusuf | 10 years ago | Reply

Transfer Federal Witholding Tax to Provinces

Sind must Broaden tax base for rural sector developments. Why the city of Thatta does not have a proper general hospital, a university, trade institutes, new interstate highway connecting major Sind cities or to city of Karachi, farm to market roads, increase production of electricity for progrss, children hospitals, sewarge system, or housing developments. Answer is obvious as there are no Agricultural Taxation for rural developments. Why Thatto District is not accessable for industrial developments, agricultural developments, business developments or to consruct a proper port city of Keti Bunder on the line of Dubai, Jedda, Singapore, or even Gwadar. The answer is simple, perhaps the MNA and MPA elected from Sind province do not have require skill to think along modern developement schemes. Why sitting MNA, MPA, and Senators from the Sind region do not in the assemblies to allocate greater amount of money for rural Sind development. Answer is simple, the rural Sind development is continuously deprived as there is no levy of Agricultural Tax for its developments. Secondly, perhaps the elected representatives again lack skills required to bring back tax money collected from Sind province from fedeartion, a lack proper education, modern pespectives, or just absentee minds!!!

Witholding Tax should not be levied as federal tax but as a provinicial tax so the money collected from a province will go back to its people for provincial development. Rural areas of Sind need money for development to be made possible. Agricultural Tax must now be enforced to raise money for provincial developments. Withholding Tax to be transfered to Provnices, allocation of money from these sources be used for rural developments as well to start building proper city structure for Thatto, Badin, Mirpursakhro, Keti Bander, Mirpurkhas etc. Lets develope our province of Sind on a modern line, we can, we must and that is our future. Agricultural financial free ride greatly hindering rural Sind progresses. Untaxed " floating," money from sale of agricultrual commodities tend to add to inflation as untaxed money chase urban properties, imported consumer goods, and fly off to far away foreign places. The windfall capital gains in all sectors need to be taxed to broaden tax base to boost needs of rural sector as well to bring gains to the commons. It is prime responsibilty of the government in power to raise standard of living of common man, to strengthen capital base of common man, to bring dignity and not out protesting for birth righrts that is theirs.

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