Monday, September 7, 2015

PML-N’s Bhatta or withholding tax

It seems the present dispensation of PML-N believes in no principles of taxation. It’s just there to extort whatever amount of taxes the Federal Board of Revenue may extort from the citizens in the form of bribes and in the name of taxes: of course, for itself as well as for the government.

However, the principles of taxation, the PML-N may be supposed to believe in, manifest themselves in the measures it announces in the budget and then obtains their approval from the parliament. That much is least controversial; what is controversial is the way the new taxes are conceived and implemented. As a rule, it’s the income or the consumption which is universally taxed. Also, the just taxation is not spending-driven, which certainly is the case as far as the PML-N government’s economic policies are concerned.

No doubt, there are countless examples available wherein arbitrary taxation was made recourse to; such as the medieval hearth tax, sort of a property tax. But, in the past they were no representative governments; that’s why they could afford arbitrary taxation policies. The question is whether PML-N, a democratically elected government, can afford such arbitrary taxation like the present withholding tax of 0.3 % on all the banking instruments, which will automatically increase to 0.6 % after September 30! Or it’s making a farce of the principle of “No taxation without the representation!”

It needs to be noted here that how come that only the traders have the courage  to espouse the cause of protesting against this arbitrary tax; doesn’t this withholding tax affect other low- and middle-income strata of society! For instance, the salaried persons, or pensioners, widowers, ordinary savers, whose earnings do not make a taxable income. All such citizens are being victimized only because on any day when they deposit or withdraw or transfer an amount of more than Rs.50, 000, they lose 0.3 % of their precious money! These citizens are not part of the protests against this Bhatta tax. They must be! Also, according to various reports the imposition of withholding tax has caused a massive reduction in the bank-deposits.

How blindly the banks operate in Pakistan the Finance Minister, Ishaque Dar has already admitted; he told that banks illegally and unjustly deducted the 0.3 % tax on all the banking instruments regardless of the fact that which ones belonged to the Filers and which to the Non-Filers. Apart from this mismanagement, the 0.3 % withholding tax is arbitrary, unjustified and has no grounds in the principles of taxation. It’s a Bhatta, at best; like the earlier one on the cash withdrawals.

Instead of putting the burden of failure on the shoulders of the FBR which according to a report of the Tax Reforms Commission is collecting only 5 % of the total income tax, the 95 % coming through withholding agents or voluntary payments. Thus the government has actually penalized those who use the banking channels.

Let any tax-expert tell what the nature of this withholding tax is! Is it on income, or is it on consumption? Or the PML-N has found another unique source of easy tax-collection, i.e. bank transactions? Better the PML-N government withdraws this Bhatta and focuses its energies on reforming the administration of tax-collection in the FBR. It is in the long-term interest of the state of Pakistan also.

It’s for the FBR to collect taxes including other taxes from the citizens who earn a taxable income. It’s not through the banks that a government collects such taxes which it fails in collecting via its tax-collector, i.e. FBR. PML-N, do not fail your government! Collect the taxes legally and principally!

Note: An edited version of this article was published in Dawn of August 10, 2015.
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