ISLAMABAD: Punjab Chief Minister Shahbaz Sharif on Thursday met Finance Minister Ishaq Dar to convince him to accept the demands of traders, mainly a tax amnesty scheme, in a bid to broker a deal ahead of by-election on the National Assembly seat NA-122.
A delegation of traders, along with the chief minister, met Dar at the Punjab House and discussed different options to break the deadlock over the 0.3% withholding tax on all banking transactions, said an official of the finance ministry.
Officials said the Punjab government was desperate to find a solution ahead of the October 11 by-election, fearing that the traders, who are considered traditional voters of the PML-N, may cast vote in favour of the Pakistan Tehreek-e-Insaf candidate.
Since July, the federal government has imposed 0.3% withholding tax on all banking transactions carried out by non-income tax return filers. At present, only 912,000 people file tax returns, although more than 4.5 million directly and indirectly pay income tax.
The traders presented their charter of demands, particularly seeking an asset regularisation scheme, in addition to exemption from the audit and inquiry about the source of income and assets, said a finance ministry official.
Finance minister’s qualms
However, Dar was reluctant to accept any demand, which may have adverse implications for the Pakistan-IMF talks, scheduled for October 26 to November 6 in Dubai, said the officials.
They said there was a possibility that both the sides may reach an understanding, which would be officially announced at an appropriate date to avoid reaction from the IMF, the Election Commission of Pakistan and the PTI.
No breakthrough was achieved during the first round of talks held at the Punjab House. Talks are expected to continue for the next couple of days.
The representatives of traders demanded that they should be allowed to give legal cover to their hidden assets by paying only 0.1% of the declared amount in taxes, said the officials.
They proposed that Rs10 million worth of assets should be legalised by paying a paltry amount of Rs10,000.
Pakistan Peoples Party had proposed a similar tax amnesty scheme during the last few months of its rule, but it was opposed by the PML-N. The traders want to come into the tax net by filing income tax returns. However, their biggest fear is that the Federal Board of Revenue (FBR) would harass them by asking the source of assets and income, said a senior FBR official.
Additionally, they demanded that they should be exempted from audit for the next three years after filing the income tax returns. Government officials showed willingness to accept this demand.
Furthermore, the FBR should determine sector-specific minimum turnover tax and maximum turnover tax should not be more than 0.2%. At present, the standard turnover tax is 1% of the value of sales.
They also demanded filing of wealth statement to be linked with a minimum Rs1 million annual income instead of Rs1 million assets. Another crucial concession sought was a relaxation in keeping the business transaction record from five years to three years.
Finally, they asked for sales tax on electricity consumption to be charged on the Rs1.2 million annual bill instead of Rs600,000.
Published in The Express Tribune, October 9th, 2015.
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