The federal government has agreed to double the minimum limit for daily banking transactions coming from non-filers. Previously, they were subjected to additional withholding tax on Rs. 50,000. Now, the additional tax will be applicable on transactions over Rs. 100,000 and will come into place following the next budget.
Ashraf Mahmood Wathra, Governor of the State Bank of Pakistan (SBP) said,
“The finance ministry and the Federal Board of Revenue agreed to increase the banking transaction threshold from the existing Rs50,000 per day to Rs100,000 for charging withholding tax in the upcoming budget of 2017/18.”
During the budget session 2015/16, the government introduced withholding tax of 0.6 percent on non-cash banking transactions of up to Rs. 50,000 per day made by non-filers of income tax returns. This was done to bring more people into the tax net. However, the tax rate was reduced to 0.4 percent until March 31 following wide-scale protests.
It was also recently revealed that the step had backfired and hurt overall banking transactions and increased the volume on cash transactions even more.
Governor SBP was in a meeting with members of Karachi Chamber of Commerce and Industry (KCCI) as well. He rejected their demand to review the 100 percent cash margin requirement on various imported items. He added that such items were selected following thorough investigation and that instead of spending foreign exchange on importing non-essential things, we need to spend it on importing capital goods.
The government recently bound importers to deposit foreign currency of the same value as the imported item in order to reduce the ever-increasing trade deficit. According to Wathra, lower oil prices led to import of non-essential items in Pakistan.
He also confirmed that a permanent amnesty scheme is on place for those who want to bring foreign exchange into the country. SBP governor said that participation of businessmen remained lackluster except for some refinancing schemes introduced by the State Bank.
Mr. Wathra expressed surprised over the substantial increase in loans under export financing scheme despite falling exports and that he had no idea about where the money was being utilized.