IT is quite shocking that despite the explicit guarantee by the government, withholding tax on National Savings Certificates (NSCs) has been increased up to 10 years by an exorbitant 75pc (from 10pc to 17.5pc).

This guarantee is stated on each certificate, according to which the government of Pakistan guarantees full payment of principal and profit payable on all NSCs with no distinction between filer or non-filer of tax returns.

It cannot be lawful for any guarantor to guarantee payment of a certain amount and then to arbitrarily reduce it subsequently by changing the terms and conditions. Therefore, the government should take notice of this anomaly and immediately refund all amounts deducted through WHT in excess of the originally-notified rate of 10pc. This is absolutely necessary in order to restore trust. Otherwise investors will always fear that such arbitrary actions would also be repeated in future, denying them their rightful dues.

They will never be sure about the profit they will receive on the maturity of NSCs and whether they will receive anything at all. The consequences may even be worse than the freezing of foreign-currency accounts in 1998 by the Nawaz Sharif government. At that time, investors were only stopped from withdrawing their deposits temporarily. Now even amounts lawfully due are forcibly being taken away.

This is extremely unfortunate because the real return on certificates now maturing is already negligible or possibly negative due to high inflation.

Saqib Masood

Karachi

Published in Dawn, October 6th , 2015

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