That the uproar on imposition of withholding tax on bank transactions continues to deepen every passing day is a poor reflection of our policymaking processes. Influenced by the International Monetary Fund (IMF) the government deemed it necessary to impose a 0.6 percent WHT on non-filers of tax returns with a view to broadening the tax base and documenting the economy. Little did, however, the Ministry of Finance realise that the new measure would attract massive protests from traders' community who argue that the government had already levied myriad of taxes and enhancing the rate of withholding tax will break the back of businesses and trade. They also argue that with increase in cash transactions the sales tax revenue will also be negatively affected as the business transactions would not be recorded and people will find it convenient to evade sales tax as well as income tax. The government revenue would decrease.
The arguments advanced by them seem to be plausible. They, however, failed to explain their resistance to government's plans aimed at documenting the economy as our businesses thrive on benami bank accounts. They have not shelved their protest plans although the government has reduced the WHT to 0.3 percent; they have vowed to step up their protest campaign after Eid. The government, on the other hand, is on an ignominious retreat. But this too offers no solution. Tax reforms. My foot!