The federal government of Pakistan is planning to collect 16 per cent FED on gross profit of exchange companies while the provincial government will receive 14 percent Sales Tax. This news has caused outrage among all the currency exchange companies. On Wednesday, the exchange companies threatened to shut down their business if the government moves forward with this decision.
The exchange companies have received separate notices from the Federal Board of Revenue (FBR) and Sindh Revenue Department to levy Federal Excise Duty and the Sales Tax on all the exchange companies from July 1, 2013.
The President of the Pakistan Forex Association (PFA) Malik Bostan said that:
Exchange Companies are already paying 33 per cent income taxes to the federal government and six per cent on rent, and if the federal and provincial governments levy taxes of another 30 per cent on exchange companies, it would be an injustice with them.
Reacting to this news, the General Secretary Exchange Companies Association of Pakistan (ECAP) Zafar Paracha said:
We are already paying a huge amount in taxes to the federal government and if the government levies another tax, we will close all our franchises and then the entire business. This is going to be another crisis for the government.
Malik Bostan informed that the Association has approached the tax tribunal, while a petition has been prepared to file in the Sindh High Court against both the governments. The association has sent letters to the Federal and Provincial governments in which they have sought time to meet them and requested for withdrawal of these taxes.
Impact on Customers
The Dollar is already being traded at around Rs 106 in the open currency market. Whereas in the dollar is standing at Rs 104.77 in the interbank market. Now with this new development about the possible taxation, there are reports that the exchange companies are deliberately increasing the exchange rates and its imminent they will continue to do so.
“Of course, the exchange companies will pass such burden on to the customers. I believe the dollar will go up against rupee which will destroy all efforts of the government to maintain a balance in the exchange rate,” explained Malik Bostan.
This situation also favors illegal dollar trading which will cause the exchange rate to exhibit massive imbalance in favor of the dollar.