The government and business community reached an agreement on Thursday on the contentious issue of charging 0.6% withholding tax, providing a face-saving way for both parties.
The agreement is a win-win situation as traders have agreed to come into the tax-net in return of getting 0.3% reduction in the rate besides availing a three-month window to file the income tax return.
“It has been unanimously decided that the government will halve the withholding tax rate to 0.3% till September 30,” Finance Minister Ishaq Dar announced. The government will promulgate an ordinance in the next 48 hours to give effect to the changes.
Finance Minister Ishaq Dar's meeting with businessmen in Islamabad on July 9, 2015. PHOTO: INP
This decision comes a day after traders became furious over the federal government’s decision to set the withholding tax at 0.6 per cent. Incensed traders staged noisy demonstrations to protest against implementation of the tax with many markets closed as part of the agitation.
Read: Withholding tax on bank transactions: Traders hit the streets nationwide
Although levied on non-filers, the traders argued that even tax filers would not be spared. They warned of extending the protest if the decision was not withdrawn.
“Why should I pay withholding tax of Rs600 on every Rs100,000 I earn?” asked Khalid Mehmood, a cloth merchant in Karachi, where the Sindh Tajir Ittehad (STI) and the All Karachi Tajir Ittehad, along with other businessmen, vent their anger in front of the Karachi Press Club.
Carrying banners and placards, they shouted slogans against Prime Minister Nawaz Sharif, former president Asif Ali Zardari and the country’s foreign ministers. “We don’t accept these unlawful taxes,” said one of the protesters.
Read: Latest tax measure: Holding protests against withholding tax
Mehmood said: “There are more than 70 other taxes that we pay.” He said the government was implementing all the taxes because it had taken loans worth billions of dollars from the International Monetary Fund (IMF) and “now they are increasing taxes just to fill their bank accounts”.
Terming the withholding tax ‘extortion’, STI chief Sheikh Habib said if the government didn’t withdraw the tax, then the protests would be expanded to a country-wide shutdown of markets.
Lucky for both the traders and the government, the tax was reduced getting control over what could’ve been a very chaotic situation for business in the country.