KARACHI: The federal finance ministry has again imposed 4 per cent super tax on banks tax income and rejected all proposals of the Pakistan Banks Association (PBA).
In a letter sent to Nisar Muhammad Khan chairman Federal Board of Revenue (FBR), the PBA expressed serious concern and disappointment over the FBR’s attitude towards banking sector in Finance Bill 2016 where almost all PBA recommendations for Federal Budget 2016-17 have been overlooked.
PBA’s other key recommendations for Federal Budget 2016-17, which have not been considered favourably, are:
a) Tax rate for banks: While the government has taken a positive step by reducing income tax rate for business income of corporate sector from 33 percent to 32 percent for tax year 2016 and further down to 31 percent for tax year 2017, unfortunately, the income tax rate for banks has not been rationalised & continues to be levied at the higher rate of 35 percent. This anomaly needs to be immediately corrected. Furthermore, advance tax instalment payment interval has been retained as monthly, compared to the quarterly, for other sectors.
b) Advance tax on banking transactions other than through cash – Section 236P: Vulnerable groups, including widows, pensioners, retirees, students… receive very low compensation/income that falls below taxable threshold, therefore are not liable to pay tax. But, withholding tax is deducted on their savings whenever they make withdrawals, which is unfair as they cannot claim credit for the deducted amount. This tax is likely to also adversely affect the National Financial Inclusion Strategy and lead to financial exclusion. PBA had recommended that Section 236P be removed, if that was not possible, exemption be provided to the vulnerable groups. Furthermore, threshold of transfer transactions be increased to Rs l00,000.
c) Advance tax on cash withdrawals – Section 231A: Unlike the previous Finance Bill, the withholding tax on cash withdrawal from each account of Rs 50,000 & above per day has been widened to cover cash withdrawal of Rs 50,000 & above per day from all banks. Not only is this unreasonable on bank customers, but it will be practically impossible for each bank to instantly compare with all other banks whether withdrawals of over Rs 50,000 have taken place every day. It is repeated that this will be impossible to implement by the banks.
“Chairman FBR, we are particularly disappointed that our proposal to overcome the impasse regarding Sections 165 & 165(A), which, during our meeting on April 22, 2016 at FBR Head Office, Islamabad, appeared to be acceptable to your team, has been ignored in Federal Budget 2016-17. PBA request the FBR, once again, to reconsider PBA’s proposal for resolution of this long standing matter & have it included in the final Finance Bill 2016 to be approved by Parliament,” PBA said.
In conclusion, PBA once again assures that the Banking Sector, which paid total taxes of Rs 121 billion for year ended December 2015, and which collected and paid to FBR withholding tax of Rs 105 billion for year ended December 2015, stands ready to support the FBR in its efforts to grow the taxation base and revenue in a fair and equitable manner, PBA added.