‘Traders to withdraw bank deposits after Oct 10’

Leaders say govt must abolish withholding tax


Shamim Shahid September 29, 2015
PHOTO: FILE

PESHAWAR: Imposing a withholding tax on withdrawals from banks has resulted in a sharp decline in lending through bank cheques in Peshawar as well as other cities and towns across the province.

The situation needs to be addressed before October 10; otherwise, the economy of K-P would take a serious hit, warned the business community. “We have asked the government to withdraw the levy by October 10, otherwise all traders would withdraw their deposits from banks,” said All Pakistan Anjuman-e-Tajran K-P President Haji Sharafat Ali Mubarak.

Effects of withholding tax

The imposition of withholding tax has significantly reduced the amount of transactions and deposits made in the banks. A banker said, “A decline of roughly Rs71.4 billion has been recorded in bank deposits.” Israr Khan, another banker in Peshawar, said a decline of about Rs3.2 billion has been noted in transactions through banks for business and commercial activities; and that too just from July to August. Managers at Bank of Khyber confirmed these claims.

The issue of declines in deposits and problems encountered by the business community was a popular topic of discussion when BoK Managing Director Shamsul Qayyum visited the Khyber-Pakhtunkhwa Chamber of Commerce and Industry on Monday. KPCCI President Fawad Ishaq Khan told Qayyum about the reservations the business community had over the imposition of withholding tax on withdrawals from banks. However, Qayyum said he could not do much about the issue at the moment.

Hawala, Hundi

Since July 2015, the bank deposits are on a decline. The amount of deposits in all banks in the province now stands at roughly Rs65.8 billion. Instead of conducting business deals through bank cheques, now almost all deals and transactions are being made through foreign currency and bonds. Transactions through cash such as ‘Hundi’ and ‘Hawala’ are now becoming popular in trade and commercial sectors throughout the region, Israr remarked.

An official at the Pak-Afghan border at Torkham also confirmed an increase in the smuggling of currencies ever since the withholding tax was imposed. Just recently, law-enforcement agencies foiled an attempt to smuggle foreign currency to Afghanistan.

Alternative means

As it is a tax-free zone, business owners from tribal areas are exempt from paying the withholding tax on their transactions in the banks in Fata. Israr said now business owners are also transferring their deposits to banks in Fata from settled areas. Moreover, the withholding tax has also boosted trade of prize bonds, said Shakir Khan, an employee at the Central Directorate of National Savings.

Mubarak told The Express Tribune, “There is no withholding tax on transactions in any part of the world; therefore, we consider our demand to be justified.” While talking about their plan of action if the government rejected the demand, Mubarak said, “We have already asked all members to withdraw their deposits from banks and a large number of business owners have already done so.”

Published in The Express Tribune, September 30th, 2015.

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