Businessmen in no mood to give in to new banking tax

Leaders of FPCCI, LCCI and ICCI say FBR should concentrate on broadening tax net instead of burdening existing tax filers

Warn of countrywide strikes and protests if govt does not withdraw decision

Business community across Pakistan has warned of protests and strike calls over the government’s decision to collect 0.6 per cent advance income tax on all banking transactions.

The FPCCI, ICCI and LCCI on Saturday unanimously demanded the federal government to withdraw the 0.6 per cent advance income tax on all kinds of bank transactions, saying it would not only affect the banking sector but also promote tax evasion by non-filers.

In separate statements, the business leaders said the new tax would also create complications in the economy as it would cause a drop in bank deposits, promote the culture of cash transactions, affect the profit margins of taxpaying businessmen and enhance turnover tax for filers. There would be more chances of crimes and money snatching as businessmen would prefer to make payments in cash besides investing in shape of gold and real estate to avoid tax, they further commented.

Federation of Pakistan Chambers of Commerce & Industry (FPCCI) Acting President Abdul Rahim Janoo opposed the levy of 0.6 per cent advance income tax on non-filers on their banking sector transaction in budget 2015-16, saying it would be an amnesty for all non-filers.

“Non-filers will pay small slab of tax on their banking transaction against big amount of tax evasion,” he said in a statement. Moreover, the banking deposits would also be reduced as the people would keep their deposits in the shape of gold or invest in real states to avoid tax, Janoo said.

He said 0.6 per cent levy would not spare any banking instrument. The banks would deduct the charges on every transaction without verifying or identifying the tax-filer or non-filer. Consequently, another chapter of adjustments or refunds would be opened for FBR and the existing tax-filers as well, he added.

He also expressed concern over the existing tax net of the FBR.

“Out of total 190 million people, about 875,000 are tax-filers. The FBR is concentrating only on the existing tax-payers rather than enhancing or broadening the tax net. The volume of banking transaction over Rs 6 trillion annually should not be linked to all non-filers. This also includes the transactions of widows, pensioners, lower cadre employees and other poor people of the society.”

Janoo said that chambers and associations from all over the country were approaching the FPCCI to take up the matter with the federal government. He suggested that the government should give 3 to 6 months timeframe to all non-filers to start filing their tax returns. “The business community all over the country will have no choice except to protest against this tax if it is not withdrawn,” he said.

Islamabad Chamber of Commerce and Industry (ICCI) President Muzzamil Hussain Sabri said the government had imposed advance adjustable income tax on non-filers to compel them to become tax payers.

He said the increased reliance of the government on withholding taxes could become counterproductive as it would further prompt non-filers to conduct cash transactions and promote informal economy in the country. He said the imposition of this tax would also give rise to inflation as non-filers would pass on their burden to the common man who will have to pay higher prices on purchases.

He said that Pakistan’s business community strongly opposed this new tax and the government should seriously consider its urgent withdrawal to avoid any disturbance to the business and economic activities.

He termed it unfortunate that the government did not take the business community on board before imposition of this tax.

“The government should shun the practice of taking unilateral decisions as it could prove detrimental to promoting documented economy,” he said.

Lahore Chamber of Commerce and Industry (LCCI) President Ijaz A Mumtaz hoped that Finance Minister Ishaq Dar would withdraw this tax as it was likely to hit the businesses hard.

He said that imposition of advance tax would force the business community to conduct its monetary transactions in cash, which would promote undocumented economy.

Mumtaz said the LCCI advocated the broadening of tax net but all measures should be taken in consultation with the stakeholders.