KARACHI: Finance Minister Ishaq Dar looked to make some amends of 0.6% tax on every bank transaction.
With growing criticism against the measure to charge 0.6% tax on every banking sector transaction, irrespective of whether it is carried out by a widow, peon or an executive – Dar hinted at setting a minimum exemption threshold to spare at least the poorest from the bequest.
The government is ready to consider recommendations regarding the 0.6% advance income tax on banking instruments and all modes of transfer of funds, which will come into force from July, said Dar on Tuesday.
According to the proposal, if a person draws cash through cheque or transfers funds through a bank draft or any other method, he will be subject to this 0.6% tax.
He was speaking at the forum of the Senate Standing Committee on Finance and Revenue. In fiscal year 2013-14, banking sector transactions, valuing Rs6.3 trillion, were carried out by all.
The government wants to retain 0.6% or roughly Rs38 billion of this amount. In the new budget, the government has proposed to charge 0.6% tax on every banking sector transaction by a non-filer, carried out through cheques, payee accounts, bank drafts, pay orders and other instruments.
Unable to increase revenues through direct means, the government seems to have run out of ideas. In the budget documents, it has estimated that the tax will generate Rs35 billion in the new fiscal year.
In the new budget, the government has also proposed to increase cash withdrawal tax from 0.5% to 0.6% but has reduced for filers from 0.3% to 0.25%.
Dar said, the committee might review the advance income tax of 0.6% on all banking instruments and recommend either lowering the rate or setting a minimum exemption threshold.
Dar maintained that there will be no tax on idle money in bank accounts. However, contrary to this, in developed countries, governments charge taxes on idle money in a bid to promote economic activity.