Business

Govt, traders meet halfway on 0.6% withholding tax rate

Decision comes day after traders protested over federal government’s decision to set withholding tax at 0.6%

Web Desk July 09, 2015

Finance Minister Ishaq Dar announces details of agreement reached with business community on withholding tax on July 9, 2015. PHOTO: PID

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

PHOTO: PID

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 They warned of extending the protest if the decision was not withdrawn.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.

COMMENTS (23)

owais | 9 years ago | Reply Its totaly unfair why ishaq dar think such a nonsenic idea

Roomi | 9 years ago | Reply I cant understand y these thieves dont just start filing income tax returns instead of resorting to anti tax demonstrations. Its just because of these thieves that mango man has to pay tax beyond his capicity and liabilty in shape of indirect taxes.

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vicktor d'souza | 9 years ago | Reply @Pakistani: Yes, do that. Meantime the government puts new paper money into circulation and declares the old notes no longer legal tender.

vicktor d'souza | 9 years ago | Reply @Roomi: Read his remarks again; he was not just referring to this new bank transaction tax, but the bigger question of income tax on pensions. Since pensions are considered unearned incomes, why should there be a tax levied in the first place ?

Shahid | 9 years ago | Reply Why is the government negotiating with these criminals? Billions worth of parallel economy and no tax filing, simply delporable.

Roomi | 9 years ago | Reply @brian… vow u r such an imtelligent man. M impressed. What pensioner, widow and student need to transact 50,000 a day???

Roomi | 9 years ago | Reply @ all tax thieves nd their cronies comenting here... Try to understand the nature of this tax. Its withholding tax… means adjustable to ur income tax liability at the time of return filing. If u are a tax filer then u need nt to pay this tax. Secondly if u pay this tax and then become tax return filer, still u can adjust it in ur annual income tax liability. The only purpose of this tax is to bring people in tax net by compelling them to start filing their returns. So u tax thieves…. Y dont u just start filing ur tax returns and u would automatically exempted from this payment…. Another thing, someone here said that people in europ germany uk etc dont have to pay transactional tax below an amount 0f 250000 euros. So brother the answer is because they r not thieves. They pay their taxes honestly so their govts need not to resort to such arm twisting. Some one else said that this tax is on middle and poor class. Vow what an idea? Which poor man needs to send 50,000 rupees faily through bank?? If u multiply this 50000 with 365 days of a a year, it gives u an amount of more than 10 million. So u think a person doing transactions of 10 millon plus annualy is a poor???? Vow what a shameful logic u thieves can concoct

vicktor d'souza | 9 years ago | Reply @MN: A one way ticket to palookaville. Baby steps, baby steps for people who had they immigrated to a developed country would be compelled to follow the rules there, but here it is to be shunned with no questions asked. I ask you, is this what independence, democracy and the rule of law is all about ? If the British were still ruling here, people wouldn't think twice about paying their taxes.

Chachoo | 9 years ago | Reply Why should I pay withholding tax of Rs600 on every Rs100,000 I earn?” asked Khalid Mehmood Somebody should tell this trader that infact he have to pay more than 16,000 in terms of taxes on his income of around 1 Lakh. In Germany the usual rate is around 35 % and in Norway it reaches upto 40 percent. But our trader is shameful to give even 0.6%?. How many traders ever pay any income tax?. My family is full of traders and let me tell you that most of them do not even have NTN. A salaried class person who earns only 20,000 Rs per month infact pays more than 600 Rs per month as a tax. But again this is Pakistan where elite can enjoy the tax free life.

Pakistani | 9 years ago | Reply @Hasan, and you being the typical nora, defend your master. How much they pay you anyway for spreading propaganda? Is it with or without tax?

Brian | 9 years ago | Reply How can the govt ask widow's, retired employees, pensioners, jobless to pay witholding tax of 0.6% on their cash withdrawls from Bank, how can these people be classified as Non-Filers, obviously one cannot ask a retired employee to be a Tax payer, he has already passed his life limit, he is retired and in no position to work. Traders many of whom i know dont even pay their income tax and have no NTN, they should be penalized and responsible for paying 0.6% witholding Tax.

Hasan | 9 years ago | Reply @YM: @pakistani This tax is for non filers. So kindly do not misguide the people here. The time is ripe in Pakistan to end the hegemony of tax thieves. Less than 1 percent of total Pakistan pay income tax and our debt have already reached 100 billion USD. In the future we will be the new Greece as if current situation will prevail then we will default on debts in the next 10 years or so.

Irshad Khan | 9 years ago | Reply I think businessmen made a big mistake agreeing to any tax for withdrawing their own money from the bank. Pakistan will be the only country in the world where people have to pay tax for using bank for their money. Rulers don't pay taxes on their billions but people have to pay tax on their money in banks that they had already paid. Ishaq Dar and Nawaz Sharif are making a big mistake, it will be bad for the banks and the country.

Hamza | 9 years ago | Reply Let's get something straight. The vast majority of the population ends up paying taxes (indirect taxes). People don't file their tax returns, however that does not mean that they're not paying taxes. The tax returns designed by FBR are unnecessarily complicated which means that a vast majority of the population simply doesn't bother filing one. In addition, with the amount of WHT, it is impossible to keep a tab on every single transaction that you're making to recover the money the government is charging. So while you may think the tax thieves are winning, the truth is we're all losing because indirect taxation is not the solution to increase revenue and the government's coffers.

YM | 9 years ago | Reply This tax affect mostly the middle and working class. 50K PKR is very small amount in these days of higher inflation. In the developed countries, there are no taxes on banking transaction at all. In whole European union, you can transfer 250K Euros without any transnational cost. The intention of the governments in developed countries is to encourage people to spend so that economy can boom. In Pakistan government is doing the reverse. It is discouraging people's from spending. This will ultimately adversely impact the economy and create an feeling of insecurity among masses. Now you have to think how much you have to spend to avoid transnational tax. In long terms this will have real bad consequences for the economy. Government should create a proper system to enforce tax return on every person instead of finding easy way to grab people's money.

YM | 9 years ago | Reply If FBR cannot enforce tax and create a system to collect taxes, then this is failure of FBR and government. Why FBR and government are not creating a system capable to enforce tax return submission mandatory on every citizen? If they create a system, it can catch the big fishes, that is what government and our finance minister definitely don't want :( Question is how this system will work? If a person has submitted tax returns, then how that person will be exempted from this tax? Do you need to carry the tax return document all the time with you? Is it also applicable on the transactions done from a foreign country? You file tax return for current year in the beginning of next year. Question is that based upon which return you will be exempted from this tax? Previous year it should be. If not then it means that you have to give away all this tax and get you money back at the end of current year tax return, means next year, besides maintaining all logs of this tax.

Desi Baaba | 9 years ago | Reply How can a Finance minister under investigation have vested interest to our country? Guilty or not guilty, allegation of this magnitude alone should be enough for him to resign. But that would be wish full thinking.

Pakistani | 9 years ago | Reply I am taking my money out of bank. All of it. This effect all Pakistanis why we are more concern abt traders only? All Pakistanis should protest and take their money out of bank for a year until, the govt get some senses

Roomi | 9 years ago | Reply Bad decision by the govt. These tax thieves should be dealt with iron handedly. In the first place they dont file their tax returns thus evade their tax liabilities although all of them falls in taxable income category. Secondly they threat govt. Whats the fault of those who pay taxes? Y to oblige these tax thieves on the cost of honest tax payers. It was a very gud decision by the government to expand the tax net and bring such thieves in tax net by compeling them file their tax returns. Govt's backtrack is a pitiful affair. Instead of decreasing the withholding rate from .6% to 0.3% govt should have waive off the 0.3% tax on filers. That could serve the govt dual purpose. 1 to incentivize people to file returns so that they will not have to pay this tax. 2ndly to give some concession to those who r already filers.

ZAK | 9 years ago | Reply When u donot pay taxes how you can expect standard life facilities at your workplace and resident. You will have to pay taxes for better living.

pk | 9 years ago | Reply govt has no right to take my finances that are lying in the bank! This is travesty of justice, utter dishonesty and bad governance. I pray we rid this country of this corrupt govt that slaves a commonman into giving their jugga taxes forced upon us. This tax is illegal!

karachi3 | 9 years ago | Reply FBR should share the tax return data summary of Business in all major cities.This will show that traders are not paying taxes while earning millions . FBR has become dysfunctional and lazy and only wants to collect taxes through withholding of taxes This 0.6% tax should remain unchanged

MN | 9 years ago | Reply There we go, obliging tax thieves again. What do i get for being an honest tax payer and filing my returns on time?

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