Non-filers likely to pay more tax on cash withdrawal from banks

ISLAMABAD: The Federal Board of Revenue (FBR) is considering jacking up the tax rate on cash withdrawal from banks from 0.6 percent to 1 percent on those who will prefer to remain outside the tax net in the coming budget.

The category of non-filers might be abolished, but the FBR will move ahead to increase the cost for those who will remain outside the tax net. The tax rates will be further increased on cash withdrawal from 0.6 percent to 1 or 1.2 percent. It is proposed that this tax should be doubled in the coming budget.

Top official sources confirmed to The News on Monday that the cost of providing relief to salaried class was firmed up and shared with the IMF. In alternate revenue measures on Income Tax side, the

FBR has proposed hiking of tax rate on cash withdrawal exceeding Rs50,000 from banks. The existing rate on cash withdrawal stood at 0.6 percent on filers. On filers, there is no tax on cash withdrawal from the banks.

“The government has decided to increase the tax rates for non-filers in the budget as revenue measures to penalise those who preferred to remain outside the tax net,” said the official and added that the FBR Chairman Rashid Mehmood Langrial introduced the concept of the incentivising the digitalisation of the economy in order to discourage cash economy.

This concept was shared with the IMF when the Fund mission inquired about the measures the government is proposing to curb cash economy. For salaried class, the work-out estimates suggest that the government will have to bear the cost of Rs50-55 billion for providing relief as for the first slab from Rs0.6 million to Rs1.2 million, the tax rate is proposed to be reduced from 5 to 1 percent. For all remaining slabs, the tax rate will be slashed by 2 to 2.5 percent. The maximum slab for salaried class will be brought down from 35 percent to 32.5 percent.

For alternate taxation measures on income tax side, the government has so far finalised increasing tax rates on cash withdrawal and jacking up tax rate on interest income in the range of 2 percent in the next budget.