Wed September 20, 2017
Advertisement
Can't connect right now! retry

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

Business

March 21, 2017

Share

Advertisement

Non-cash banking transactions sharply fall 29 percent in July-Feb

Non-cash banking transactions sharply fall 29 percent in July-Feb

KARACHI: Non-cash banking transactions by non-filers of income tax returns sharply declined 28.5 percent to Rs193 billion during the first eight months of the current fiscal year of 2016/17 as they switched to informal banking to avoid an enhanced withholding tax, sources said on Monday. 

Non-cash banking transactions by non-filers, falling under an extended scope of withholding tax rate, amounted to Rs270 billion in the July-February period of 2015/16.

Consequently, the sources added, the Federal Board of Revenue (FBR) managed to collect only Rs7.72 billion under this head in July-February FY17 as compared to Rs8.04 billion in the corresponding period of the last fiscal year, showing a decline of four percent.

The government, through Finance Act 2015, introduced a new section 236P into Income Tax Ordinance 2001 under which a 0.6 percent withholding tax rate was imposed on a non-cash banking transaction above Rs50,000 by the non-filer.  The measure was taken to encourage filing of annual income tax returns and documentation.

Soon after the imposition of the withholding tax, there was a hue and cry from the trade community, which forced the government to reduce the tax rate to 0.3 percent, implemented from July 11, 2015 and prevailed until February 29, 2016. However, despite reduced rate traders and other potential taxpayers remained unwilling to get registered and so the rate was revised up to 0.4 percent, which is applicable till to date.

The FBR sources said increase in tax filers, during the tax year 2015, was a major reason in reduction in tax collection under this head. Number of 2015 filers increased to 1.2 million from the preceding year’s 0.86 million.  Sources said the tax departments launched strict monitoring of banks in order to identify shortfall in revenue collection under this head.

The State Bank of Pakistan (SBP), in its annual report 2015/16 on state of Pakistan’s economy, said the use of cash would further increase due to imposition of withholding tax on non-cash banking transactions. “Not only would these developments constrain future tax collection, these may also undermine financial inclusion efforts of the government and SBP.” The SBP said there was a rise in purchase of higher denomination of prize bonds as a consequence of an increase in withholding tax rate.

Businesses were using higher denomination prize bonds to settle their transactions instead of using banking instruments like demand drafts and cheques, it added. “This is the major reason why the increase was more pronounced for larger denomination bonds, including Rs40,000 and Rs25,000. Hence, higher investments in prize bonds have come at the expense of bank deposit growth.”

 

Advertisement

Comments

Advertisement

Topstory

Opinion

Newspost

Editorial

National

World

Sports

Business

Karachi

Lahore

Islamabad

Peshawar

Advertisement