KARACHI: Withholding tax imposed on banking transactions and withdrawals was a serious issue that has created a lot of bad blood between the government and the business community, Sindh Finance Minister Syed Murad Ali Shah said on Monday.

“The less we rely on WHT, the better. It’s a forced tax and an outcome of underperformance of federal tax collection machinery,” he told journalists on the sidelines of a workshop on sub-national taxation organised by the Sindh Revenue Board (SRB).

Concurring with Shah, SRB Chairman Tashfeen Khalid Niaz likened withholding tax to extortion, saying it should not be imposed under any circumstances. “It’s infringement on provincial rights, but also on citizens’ rights. We need to move away from WHT.”

On federal government’s offer to sell off Pakistan Steel Mills to Sindh, Shah repeated his assertion that he was unaware of any such development. “The centre hasn’t contacted us yet on the matter.”

The Cabinet Committee on Privatisation on Friday decided to offer the mill, along with all its assets and liabilities, to the Sindh government, saying that the provincial government “has conveyed its interest to acquire the organisation”.

On assigning collection of sales tax on goods to provinces, Shah said the centre need not worry as “we will not only guarantee the same amount as set by the federal government, we will try to exceed the target”.

Sindh has been making a case that its revenue collecting authority, along with those of Punjab and Khyber Pakhtunkhwa, were more capable of collecting taxes on goods and services and the centre should not encroach upon provincial taxes by imposing withholding taxes.

When asked about reports that K-Electric was charging hefty bills under a new tariff structure, the Sindh finance minister said all the power utilities, including those of Hyderabad (Hesco) and Sukkur (Sepco), will have to pay for overbilling Sindh’s people. “It was evident from Nepra’s report that all power companies sent wrong bills to consumers,” Shah said, referring to National Electric Power Regulatory Authority’s annual report for 2014-15.

Revenue collection by the Sindh Revenue Board, set up in 2011 to collect sales tax on services, has been on a constant rise, going up from Rs25bn in 2011-12 to Rs49.3bn in 2014-15.

Talking to Dawn, SRB’s Adviser for Tax Policy Mushtaque Kazimi said Sindh’s performance regarding collection of sales tax on services was better than Punjab despite the fact that the latter was more urbanised. This fiscal year’s target is Rs61bn while the authority is eyeing to maximise this revenue to Rs100bn during the next year, he added.

Other participants who spoke on the occasion included Alexandre Arrobbio, Raul Junquera and Rajul Awasthi of the World Bank and Muhammad Awais of Ernst & Young.

Published in Dawn, October 6th , 2015

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