Finance Minister Ishaq Dar has agreed to consider a threshold of Rs 50,000 per transaction for applicability of 0.6 per cent withholding tax on all the banking instruments to bring the non-filers into the tax net. Senate Standing Committee on Finance presided over by Saleem Mandviwala was told that any body that does not file tax return would be charged at the rate of 0.6 per cent on every banking transaction. The members of the committee suggested that the proposal would be counterproductive and it would encourage cash transactions through non-banking sector.
Additionally, people would transfer their money from banking accounts to lockers in order to avoid tax, stated Senate Talha Mehmood, adding that account holders have already started shifting their money to lockers. Another senator stated that people would prefer non banking sector transactions such as Hundi for money transfer instead of banks due to the proposed tax.
The Finance Minister said that original proposal was to tax at the rate of 0.6 per cent on every transaction of both the filers as well as non-filers. However, after deliberation it was decided that the 0.6 percent tax would be applicable on non filers only.
He said that he was ready to consider committee''s suggestion that 0.6 per cent tax would be applicable only on transaction threshold of Rs 50,000 to bring the non filers into the tax net. He added that tax would be on all kinds of transactions but it would not be applicable on deposits. Dar said that committee has to decide whether it wants the tax rate to be reduced or suggest a size of the transaction.
Dar said the next fiscal year would be difficult because the government would require Rs 100 billion for two transactions. The Minister added that the government would require Rs 55 billion for rehabilitation of the Temporary Displaced Persons (TDPs) and Rs 45 billion for their security-related expenditure. The Finance Minister said that the assessment of fund required for the TDP was worked out by a committee constituted with the Minister for States and Frontier Regions (SAFRON). The Minister added the government has targeted less than 200 companies, AOPs and individual for one time Super Tax to mobilise some fund for the TDPs. The government has carried out a detailed analysis before the imposition of the Super Tax. If the government reduces the amount from Rs 500 million threshold to Rs 200 million as suggested by some members, the number of companies would increase to 1000 but collection would increase very nominal to around Rs 2 billion.
When committee members proposed to make Super Tax voluntary, Ishaq Dar recalled experience of Income Support Levy (ISL). The ISL was voluntary and a large number of people went into ligation against the levy. He said that only Rs 85 million was materialised during the tax year. If the Super Tax has been made optional, it would meet a similar fate. He added that 3 per cent tax is mandatory in the tax year 2015; however, the committee can improve it by suggesting an increased tax. Later, the committee approved imposition of ''Super Tax''.