KARACHI: The Finance Supplementary 2nd Amendment Bill presented by Finance Minister Asad Umar on Wednesday has proposed to remove withholding tax (WHT) on bank transactions and cash withdrawals by tax return filers.
The government acknowledged in various documents that withholding tax imposition is a major impediment to banking sector’s growth. “Depth and breadth of financial system remain low in Pakistan as indicated by lower bank deposits as percentage of GDP due to lower saving rates in the economy, high currency (in circulation) to deposit ratio and imposition of withholding tax on cash withdrawals and bank transfers,” a document submitted to the International Monetary Fund (IMF).
The government imposed withholding tax on financial transactions with an aim to increase compliance and broadening of tax base. It also resulted in additional revenue for the FBR. The government imposed withholding tax on cash withdrawal through Finance Act 2005 in order to discourage cash economy. It further imposed withholding tax on non-cash transactions that was aimed to increase the cost of transactions made by non-filers of income tax returns. [the_ad id=”31605″] Asad Umar alaso proposed to make 6.0 percent minimum tax on traders and businesses into final tax.
The businesses are required to file WHT statement every month; with a view to ease doing business, Supplementary Bill proposes that WHT statement would only be submitted twice a year.
Asad Umar also announced that the scheme introduced by previous government to reduce corporate income tax by 1.0 percent every year will continue.
Supplementary Bill also proposes to reduce corporate tax on banks on income earned from SME financing, agriculture financing and low-cost housing financing to 20 percent with no super tax.
It may be mentioned here corporate tax on banks stands at 35 percent along with 4.0 percent super tax.
Asad Umar also announced to remove 0.2 percent withholding tax on shares trading.