Government to Deduct 0.6% of All Banking Transactions in Taxes

News is that government is planning to levy a 0.6% tax on every banking transaction, including bank withdrawals, cheque transfers, intra-bank transfers or anything that involves cash and bank

While Finance Minister Ishaq Dar is looking for a minimum threshold to spare the poor from the tax, it is not enough to placate the majority of the nation who see this as a desperate ploy by a government which can’t figure out how to raise money and has resorted to extreme steps.

The 0.6% advance income tax could net the government PKR 38 billion in its current form

In 2013-14, there were PKR 6.3 trillion worth of banking transactions. 0.6% of that is PKR 38 billion, a significant amount by any means.

Keep in mind that it would apply to everybody. Transferring cash online, withdrawing via cheque, bank drafts; anything and everything would be subject to the tax. This is precisely why the government’s ineptitude when it comes to collection of tax becomes an issue. Pakistan has 190 million people. Less than 900,000 pay tax. Wouldn’t it be more efficient to increase the number of people who pay tax rather than come down harder on the ones who already do?

Also Read: 8% Minimum Tax on Companies to Kill ICT Companies, Startups

Recent data indicates that the government has taken no such steps to increase tax-net and the decision to not even spare widows and pensioners from the new tax is quite simply staggering.

Currently, an exemption for transactions up to PKR 50,000 is being discussed in the standing committee which is discussing the Finance Bill for 2015. Right now, 0.3% tax is charged from filers and 0.5% from non-filers for transactions above PKR 50,000.

In this year’s budget, cash withdrawal tax would increase for non-filers (0.5% to 0.6%) and reduce for filers (0.3% to 0.25%). According to Ishaq Dar, the standing committee will reconsider the 0.6% tax on banking transactions and would either suggest lowering it or imposing a minimum exemption threshold.

“People have started withdrawing cash from banks and converting into gold to avoid taxes” – Senator Talha Mehmood, JUI-F

Idle money in banks won’t see new taxes but that’s in contrast to developed countries, where it does. Others have said that the new tax would increase activity in the informal banking sector, which is already a huge issue.

via Express Tribune

Talal is the Editor in Chief at ProPakistani. Reach out at [email protected]