Govt forms three committees to resolve tax controversy

ISLAMABAD: Following the imposition of withholding tax (WHT) on all the banking transactions, Governor State Bank of Pakistan (SBP) Ashraf Mahmood Wathra on Monday said that the central bank was closely watching deposits volume of the banking sector but so far it did not find out any major variations.
This scribe raised this question before the governor SBP when the traders had announced to observe a shutter down strike on August 1 and they were also giving threats to withdraw their deposits from the banking sector. There were reports that the transactions of the banking sector witnessed a massive decline during July 2015 as businessmen preferred to go ahead with cash payments instead of using banking instruments.
The government and trading community on Tuesday again remained unable to resolve thelingering controversy on reduced rate of WHT to 0.3 percent from the earlier rate of 0.6 percent on all banking transactions but the government announced to constitute three different committees to resolve problems of trading community.
“It’s premature to give any judgment on impact of imposition of WHT on banking transactions because holidays were continuing after the start of this financial year because of Eid. So far the central bank has not witnessed any major variations in deposit volumes of the banking sector in the aftermath of imposition of WHT on all the banking transactions,” Ashraf Mahmood Wathra said while talking to reporters after attending the Senate Standing Committee on Finance meeting held here at the Parliament House on Tuesday.
He said that the central banking being the regulator was closely watching developments of the banking sector in this regard but it did not find any reduction in deposit volumes so far. Meanwhile, on the invitation of Finance Minister Ishaq Dar, the government’s team and representatives of the trading community conducted a round of parleys here at the FBR’s headquarters on Tuesday but failed to achieve any desired results.
After the announcement of the All Pakistan Anjumane Tajran (APAT) for observing a shutter down strike on August 1 all over the country, majority of representatives of small traders did not turn up in Monday’s meeting.
The sharp divide within the ranks of ruling PML-N is also fuelling the strike call of traders on the imposition of WHT on banking transactions as traders were demanding of the government to abolish this tax in totality.
Chairman FBR Tariq Bajwa argues that the withholding tax of 0.3 or 0.6 percent would be imposed on non-filers so the filers should not worry about it.
But the traders are facing a very tricky situation who usually maintained more than one bank account to hide their real sales and income for tax purposes. If they come into the tax net and show increased sales, it will result into increased amount of 17 percent sales tax.
After holding parleys with representatives of the business community, Adviser to the PM on Revenues Haroon Akhtar told the media that the government constituted three different committees on income tax, sales tax and communication committee to ensure outreach with the business community in order to resolve their problems.
He said that it was the right of the trading community to observe a peaceful strike but the doors of the government were open for resolving all genuine problems of the trading community. “It is a golden opportunity for them to get a package providing them a level playing field by coming into the tax net,” he said and added that the committees constituted by the government would start their deliberations from the coming Friday.
The strike call, he said, became their political compulsion but the government possessed strong footings and there was a need to understand the whole issue and come on the negotiation table for a win-win situation for all sides. To another query regarding differences within the ranks of PML-N over the imposition of WHT, he said that there was no such thing in party ranks.
The FBR stated in a statement issued on Tuesday night that in pursuance of the agreement between the business community and FBR in a meeting held in FBR (HQs) on 9-7-2015, a meeting of representatives of business community was held.
The three committees will have the powers to co-opt other members if considered necessary. Income tax and sales tax committees shall submit their reports by the 13th of August, 2015. The first meeting of these committees will be held on Friday 31st of July, 2015 at FBR (HQs).