The government, instead of encouraging them, has tried to crush them under heavy taxes.
KARACHI: The duty of providing protection, safety and security to citizens is a basic responsibility of the government. Maintenance of proper law and order results in a peaceful environment, which in turn not only encourages local entrepreneurs to invest in businesses, but also attracts foreign direct investment, thus fostering economic wellbeing and progress. There is no denying the fact that to execute various responsibilities and for smooth functioning, the government needs finances, which are collected through levying various taxes. However, it is expected that the taxes will be levied with some rationale so as not to discourage any useful service, industry or product. Unfortunately, in the recently announced budget, erroneously or deliberately, this aspect has been ignored with regard to private security services. Due to resource constraints, it is difficult for the government to provide effective security cover to all areas of the country. Therefore, the role of private security services has become a necessity in recent times.
All over the world, these services are encouraged by governments and, in fact, private security personnel always outnumber the police. In the US, the ratio of police personnel to private security personnel is 1:4. In India, it is 1:10 and in the UK it is 1:5. Even in Pakistan, there are over half a million people engaged in providing private security services, carrying out tasks that are meant to be the responsibility of the government, like ensuring the security of banks, industries, foreign missions, embassies, multinationals, hospitals, airlines, communication towers, vital installations, malls and a host of other places. Private security services, in reality, are helping the government maintain a peaceful environment. The government, instead of encouraging them, has tried to crush them under heavy taxes. The recent amendments made to the Finance Act 2015, have declared a withholding tax deducted at eight per cent at source as minimum tax, with effect from July 1, 2015. This deduction is very high, unrealistic, unjustified and brutal in nature.
To understand the implication of this in simple words, for every Rs100 of gross receipt of security services, 90 per cent is spent on the cost of services, leaving behind a margin of only Rs10 for administrative expenses and profits. The 90 per cent cost of service comprises the expenses on salaries of personnel, weapons, vehicles, uniforms, paid leaves, overtime, EOBI payments, social security, insurance, staff welfare and transportation obligations. The eight per cent withholding tax will actually become 80 per cent tax on the leftover business income, after bearing direct costs. It is not a viable business proposition. This will definitely result in not only the death of private security services, but will also render around half a million people associated with such companies jobless. This injustice done to private security services needs to be undone if the government wants them to continue contributing towards assisting its law-enforcement agencies. In fact, it would be more appropriate to provide incentives and lessen the tax burden on such services so that private security could further enhance its supportive role. It would be in the fitness of things if the finance ministry looks into the troubling situation objectively and rectifies this tax anomaly with respect to the security services sector, which relies heavily on manpower. The withholding tax should be an adjustable tax, rather than a minimum tax.
Nisar Sarwar
Ex-chairman
All Pakistan Security Agencies Association
Published in The Express Tribune, July 10th, 2015.
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