revenue earned, he maintained.
Mehr said the service sector is already paying 32 percent corporate tax and was recently stabbed with 16 percent and 14 percent GST in Punjab and Sindh, thus making the sector more uncompetitive. From July 1st 2015, a corporate tax of 32 percent is applicable to all sectors and industries except for the service sector.
The service sector contributes around 53 percent to the GDP and has created numerous employment opportunities, while making a significant contribution to the national tax kitty. Why the government has discriminated the service sector, while all other sectors have been facilitated by the reduction of the corporate tax from 35 percent to 32 percent over the past few years, he said.
The WHT is not considered as full and final settlement anywhere in the entire world and is always adjustable against tax liability. “To the best of my knowledge the maximum rate of WHT around the world is not more than five percent as well and is adjustable,” he said.
Under the new tax law, a minimum of eight percent tax on revenue will be withheld regardless of whether the service company is profitable or in loss.
As the average net profitability is 6-8 percent after tax in most businesses, an increased rate of minimum eight percent WHT on revenue (even if it was adjustable against tax liability) had put companies into liquidity crises and consequently they were unable to pay their debts on time.
By imposing a minimum eight percent WHT the government has ignored the profitability of small to medium size companies, he added.
Mehr said the government has also ignored another very important aspect while levying this tax i.e. the difference between a company that has low profit margins with high revenue and a company with high profit margins with low revenue.
As such, this tax law has failed to bring equality for different types and scales of businesses.
The law would force people to rather put their money in banks and earn interest, this amalgamates hoarding with inflation and has an adverse effect on the economy as well as this tax regime will be producing property dealers & shopkeepers but not entrepreneurs.
The amendment of the new law would only give way to financial malpractice of undervaluing the revenue just to save something that belongs to the rightful hard working owners, he added. If this law is not undone immediately, hardly any company would survive, he maintained.