Commercial banks deduct withholding tax due to faulty ATL

LAHORE: The commercial banks due to the faulty Active Taxpayers List (ATL) have started deducting the withholding tax on banking transactions even from the active taxpayers, who are regularly filing their returns.
After the tax deduction, the banks suggest their clients to claim refund from the Federal Board of Revenue (FBR) which is an uphill task for small taxpayers who are doing documented business.
Imran Qureshi, owner of a small service sector company, said the commercial bank he where he holds an account has deducted Rs8,000 withholding tax from his transaction. “I am a regular taxpayer and file my return without delay,” he said, adding that he hired the services of a tax consultant due to the tricky and complicated tax return form.
Qureshi said the branch manger proved that according to the data available with the branch, his name did not exist in the ATL, due to which the tax was deducted automatically. The manager suggested claiming a refund.
Banking officials of different commercial banks also confirmed similar cases being reported on a daily basis to their respective branches. They said that due to the faulty ATL, customers were quarrelling with them. But there was no way out, they observed.
Earlier, the Federal Tax Ombudsman had also taken notice of the complaints by taxpayers who faced difficulty at post offices while depositing withholding tax for renewal of vehicle registration. The authority had taken notice of the faulty ATL and instructed the FBR to extend the date by one month.
An official of the FBR said the automated system has been developed whereby any taxpayer, who filed return of income, would get the ATL activated through SMS. For this purpose, an advertisement has already been published in the national dailies.
Finance Minister Ishaq Dar, reportedly had also shown serious displeasure on the issue and asked the FBR, commercial banks and State Bank of Pakistan (SBP) to redress the issue amicably. However, the deduction continues.
Lahore Chamber of Commerce and Industry (LCCI) Progressive Group President Khalid Usman urged the finance ministry and FBR to take notice of the banks deducting 0.3 per cent withholding tax from even the filers despite the government and FBR’s clear instructions.
He said different traders were complaining about the unlawfully deduction by banks, especially those who have NTN numbers in their name, but not against their company. Such traders and businessmen are regular in filing their income tax return mentioning all their income.
He said it is almost next to impossible to get refunds from the FBR. Stuck up refunds also create liquidity problem for the businessmen, especially for small businesses.
Progressive Group president said that nobody was against paying taxes, but the FBR, instead of relying on indirect taxes, should broaden the tax net. Constitution of committees by the FBR in the name of facilitating the traders will not work. “The government should pay attention to the real cause of concern. This kind of indirect tax will have a multiplied impact on the transactions. It is hampering the banking transactions and use of formal money transaction channels,” he added.
Usman said this tax will not only decrease economic activity, but also encourage people to handle all their transactions in cash, hampering government efforts to expand the tax net.
He said not only would this discourage the use of banking channels, but also hinder the business of the largest service sector, rendering losses to the national exchequer.