Senate Committee Approves Tax on Bank Transactions

A Senate committee backed on Tuesday the imposition of 0.6 per cent tax on all banking instruments of over Rs50,000 for non-filers of returns, while Finance Minister Ishaq Dar agreed to put in place a mechanism to finance through the Public Sector Development Programme schemes recommended by senators.

At a meeting of the Senate Standing Committee on Finance and Revenue, the government also reported an agreement between Khyber Pakhtunkhwa and the centre to extend sales tax laws to the provincially administered tribal laws which are currently exempt from the levy.

The Chairman of the Federal Board of Revenue, Tariq Bajwa, told journalists that a law to track down benami land titles for tax purposes was ready and would be introduced after the budget session of parliament.

The committee led by Senator Salim H. Mandviwala of PPP began deliberations on federal budget 2015-16 for amendments and recommendations to the National Assembly regarding fiscal and development measures for next year.

Senators were opposed to the introduction of “super tax” at the rate of 3pc and 4pc on individuals including association of persons and companies having over Rs50 million annual income to finance a part of expenditures on raising of new security apparatus and settlement of temporary displaced persons (TDPs) of Waziristan. Some of them proposed to make this contribution voluntary or the income threshold be brought down to Rs20m with reduced tax rate.

Finance Minister Ishaq Dar, however, said the expected collection through super tax would be around Rs20-22 billion that would be applicable to 170 companies, eight AOPs and three individuals with annual income exceeding Rs50 million.

He said the FBR had done a series of exercise and the reduction in income threshold would have affected thousands of people but negligible increase in tax collection and hence rejected due to higher political nuisance. The minister said current situation was very extraordinary because around Rs45bn would be required for security enhancement and around Rs55bn for the resettlement of TDPs.

He rejected call for seeking voluntary contributions, saying his previous experience with voluntary contribution for income support programme was disappointing because only a couple of people came forward with contributions.

The committee agreed to go ahead with 0.3pc tax on all banking transactions for tax filers and 0.6pc for non-filers over Rs50,000 per transaction but recommended that a policy message should go out in the shape of facilitation that tax filers were better off paying taxes and filing returns so that non-filers come into the tax net. Besides cash withdrawals, these tax rates would be applicable on demand draft, pay orders, SDRs, CDRs, STDR, call deposit receipt and RTCs.

The minister did not agree with a senator that electricity rates had been increased to reduce subsidy, saying tariff differential subsidy had been limited to small consumers worked out on the basis of tariff approved by the National Electric Power Regulatory Authority (Nepra). He said the government had provided about Rs2.6 trillion in power sector subsidies over the last six years.

Senators criticised the government for blocking disbursement of PSDP funds in first 11 months of the year and then releasing in the last month of the fiscal year, which they said resulted in misuse of funds. Secretary finance Waqar Masood Khan, however, explained that it was because of proportionate revenue collection that usually maximise in the last month.

Senator Fateh Mohammad Hasani from Balochistan recommended that like members of the national and provincial assemblies, senators should also be given at least Rs200m every year for development schemes. Other senators supported the demand.

Mr Dar said the practice of providing funds even to the MNAs had been blocked following a 2012 decision of the Supreme Court of Pakistan, put restriction on supplementary grants, re-appropriation of funds and discretionary funds for development even at the disposal of the prime minister.

Mr Dar said he himself challenged the decision because no government around the world could function without re-appropriation of funds or supplementary grants and nobody could deprive any government from this right to have control over funds.

He said the court had accepted his plea regarding supplementary grants and re-appropriation and conceded to have committed oversight. However, he said the case was still before the court that had not allowed discretionary funds to parliamentarians.

He assured the senators that he would work out some constitutional and legal means to spend development funds on the recommendations of the parliamentarians, irrespective whether they were members of the Senate or National Assembly.

The meeting was informed that a meeting attended by the prime minister and governor and chief minister of KP had decided to extend sales tax laws to provincially administered tribal areas of KP and a summary had been moved for its implementation at the earliest.