KARACHI: The imposition of 0.3 per cent withholding tax (WHT) on banking transactions by the Federal Board of Revenue (FBR) can bring paradigm shift in taxation system by helping increase revenue collection and tax-to-GDP ratio, experts say, adding that the business community was misrepresenting the issue.

The government introduced section 236-P in the Finance Act 2015, directing banks to deduct 0.6pc withholding tax on all intra-banking transactions, including cheques, pay orders, demand draft, online transfers, etc.

However, the government later halved the rate to 0.3pc which will be in force till Sept 30 — the last date for filing income tax returns for the tax year 2015.

Anwar Kashif Mumtaz, former president of Karachi Tax Bar Association Anwar (KTBA), said this move would prove highly effective in tracing ‘black money’ safely parked in real estate and other sectors of economy. “It’s an adjustable tax that is accounted at the time of filing of returns.” However, non-filers of tax returns will have to pay this levy.

Younus Rizwani Sheikh, tax consultant and former president of All Pakistan Tax Bar Association (APTBA), said the deduction of withholding tax by a bank at the time of payment will help to document the transactions, thus checking free movement of ‘black money’.

Presently, property transactions worth billions of rupees take place without being documented because tax authorities have no access to such deals and transactions. The WHT, however, would help drive speculators from the market and burst the property price bubble, he added.

Mr Sheikh said payments against properties worth millions of rupees are being registered at the collector’s rates which are unrealistic and are much below the market price. “This does not only deprive the national exchequer of huge amount, but also provide opportunity to whiten black money.”

KTBA’s secretary Mohammad Aleem raised suspicions over intentions of protesting traders, and urged the government not to give in to the pressure mounted against the withholding tax on banking transactions.

Published in Dawn, August 2nd, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play