Squeezing savings

Savings are considered to be the backbone of every economy. It is the main source of credit on which the whole banking industry is based. In an underdeveloped country like Pakistan people can hardly make ends meet due to the high cost of living, resulting in a dismal savings rate. However instead of encouraging the culture of savings by providing more incentives to depositors, successive governments have levied an exorbitant, flat withholding tax of 10 percent on total profit from savings. To make matters worse, the last PML-N government imposed an outrageous withholding tax of 17.5 percent on total profits exceeding Rs500,000 per annum for non-filers. This punitive action on savings is beyond comprehension as savings are imperative for the economy. Otherwise people will start withdrawing from banks and start investing in other non-revenue generating commodities such as gold, property, vehicles etc triggering runaway inflation.

Instead of rectifying this situation, the current PTI government which claims to have provided relief to tax filers, has jacked up the withholding tax on profits exceeding Rs500,000 per annum for compliant tax-filers from 10 percent to 15 percent in the last budget. Whereas the withholding tax on the profits of non-filers exceeding Rs500,000 per annum, has been jacked up to an unbelievable 30 percent. Therefore, the present government is requested to review this injustice and give some relief to depositors.

Fuad Enver

Islamabad