De­vi­a­tion from tax prin­ci­ples

The Pak Banker - - 4EDITORIAL - Dr Khalil Ah­mad

THE with­hold­ing tax em­bod­ies no prin­ci­ples of tax­a­tion. For all prac­ti­cal pur­poses, it is an ex­trac­tive prac­tice that is de­void of eq­uity and just there to raise so-called tax rev­enues. How­ever, the prin­ci­ples of tax­a­tion, as they man­i­fested in the mea­sures an­nounced in the bud­get and sub­se­quently ap­proved from par­lia­ment, are the least con­tro­ver­sial. What is con­tro­ver­sial is the way the new taxes are be­ing con­ceived and im­ple­mented.

As a rule, it's the in­come or the con­sump­tion that is uni­ver­sally taxed. Also, just tax­a­tion is not sup­posed to be driven by spend­ing. In­stead of putting the bur­den of fail­ure on the shoul­ders of the FBR, the gov­ern­ment is pe­nal­is­ing those who are us­ing the bank­ing chan­nel

No doubt, there are count­less ex­am­ples of ar­bi­trary tax­a­tion, such as the me­dieval hearth tax, which was sort of a prop­erty tax. But they were no rep­re­sen­ta­tive gov­ern­ments in the past; which is why they could af­ford ar­bi­trary tax­a­tion poli­cies. The ques­tion is can the demo­crat­i­cally elected PML-N gov­ern­ment af­ford such ar­bi­trary tax­a­tion mea­sures like the cur­rent with­hold­ing tax of 0.3pc on all bank­ing trans­ac­tions, which will au­to­mat­i­cally in­crease to 0.6pc af­ter Septem­ber 30. Or is it mak­ing a farce of the prin­ci­ple of 'no tax­a­tion with­out rep­re­sen­ta­tion'?

But how come it is only the traders who have the courage to protest against this ar­bi­trary tax, for doesn't this with­hold­ing tax af­fect other low- and mid­dlein­come peo­ple of so­ci­ety as well? They in­clude pen­sion­ers, wid­ow­ers and or­di­nary savers, whose in­comes are not tax­able. All such cit­i­zens stand to lose 0.3pc of their hard-earned money if they with­draw or trans­fer an amount ex­ceed­ing Rs50,000 on any day. These cit­i­zens are not part of the protests against this tax. They must be.

Then some banks have re­port­edly il­le­gally and un­justly de­ducted the 0.3pc tax on all bank­ing trans­ac­tions, for­get­ting which ones were con­ducted by fil­ers and by non-fil­ers. The 0.3pc with­hold­ing tax is ar­bi­trary, un­jus­ti­fied and has no grounds in the prin­ci­ples of tax­a­tion.

In­stead of putting the bur­den of fail­ure on the shoul­ders of the Fed­eral Bureau of Rev­enue (FBR) - which, ac­cord­ing to a re­port by the tax re­form com­mis­sion, is col­lect­ing the bulk of taxes through with­hold­ing agents or vol­un­tary pay­ments - the gov­ern­ment is pe­nal­is­ing those who are us­ing the bank­ing chan­nel. No tax ex­pert could tell defini­tively if this with­hold­ing tax is on in­come or on con­sump­tion. It looks more likely that the PML-N has found another unique source of easy tax col­lec­tion, i.e. bank trans­ac­tions. It would be bet­ter if the gov­ern­ment with­draws this tax and in­stead fo­cuses its en­er­gies on re­form­ing the FBR.

It is the FBR's re­spon­si­bil­ity to col­lect taxes from cit­i­zens who earn a tax­able in­come. The gov­ern­ment is not sup­posed to col­lect the taxes through banks that its own tax au­thor­ity fails to col­lect.

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