Your ministry’s new policy of charging 20pc tax on prize payments of Prize Bonds from non-filers and 15pc tax charge from filers, has literally back fired, resulting in additional 5pc income (at the expense of government) for Prize Bond sale purchase companies, in the open market.
These companies (which are filers) charge 20pc tax deductions from the winning bond sellers (mostly non-filers) and pay 15pc tax, while getting prizes on the winning bonds from the SBP.
In order to give a fillip to the national economy, by boosting the very low domestic savings rates; via encouragement of people to invest more in the Prize Bonds, the rate of tax on Prizes of bonds, must be lowered for all categories and fixed at 10pc.
Please inform your financial experts that as per the law of diminishing returns, regressive taxation never increases revenues. Yes, it definitely increases leakages, corruption and size of the hidden economy. As such, out of box thinking in running the modern economy, is the name of the game, rather than beating around the bush.
Syed Nayyar Uddin Ahmad
Lahore