Services sector: Companies raise voice against 8% minimum tax

Newly formed action group threatens to discontinue services

LAHORE: Leading companies of the services sector have raised their concern over the impact of revised minimum revenue tax on their businesses and have formed a new association called the Services Sector Action Group to convey their message to the government corridors.

It was agreed in the first meeting of the group held in Lahore that the imposition of 8% minimum tax posed a threat to a large number of services companies.

It was also decided that until a relief was provided, a number of companies would discontinue their services and an announcement in this regard would be made soon. The group is also considering resorting to legal options.

“We appreciate the government’s steps for the promotion of technology and services sector, but unfortunately the minimum tax will undo much of what has been achieved so far and hinder the sector’s progress,” said Abacus Consulting Partner Abbas Ali Khan.

“This will especially impact start-ups and SMEs as many of whom operate on narrow margins. We plead the government to review this matter immediately,” Khan added.

In the federal budget for 2015-16, the 8% withholding tax on payments to service providers is to be considered a minimum tax regardless of whether the service provider is a profitable or loss-making entity. In the case of loss-making companies, this tax will be paid from their capital reserves, effectively becoming a capital tax and a loss penalty on those investing in the services sector.

Published in The Express Tribune, August 25^th,  2015.

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