KARACHI: To resolve the issue of Withholding Tax on bank transactions, President of the Karachi Chamber of Commerce and Industry (KCCI) Iftikhar Ahmed Vohra has proposed that the National Tax Number (NTN) should be made compulsory for all Current Accounts/ Business Accounts opened by the banks.
“No bank account should be opened without the NTN certificate and all existing account holders may be required to submit NTN certificate issued by the FBR otherwise the account should be closed. A threshold may be fixed for turnover in Savings Account, and NTN should be made compulsory for turnover exceeding the threshold”, President KCCI added in a letter issued to Federal Minister for Finance Mohammad Ishaq Dar.
He was of the view that once the particulars of accountholder are available to FBR through NTN, it has the required powers under the Income Tax Ordinance as well as other prevailing laws to pursue the registered person to file Tax Returns.
“It is important to distinguish between Non Filer and Unregistered person. The term non-filer is based on the assumption that the person is registered but not filing the returns. Therefore the concept of registered and unregistered persons should be applied instead of Filer and Non-Filer”, he advised.
President KCCI further pointed out that it was not the function of banker or the account holder who is a Filer, to ensure that Tax returns are filed by the registered person. As long as a person is registered, it is the function of FBR and RTOs to ensure compliance under the provisions of Income Tax Ordinance which confers the powers on RTOs to ensure compliance and no short cuts such as WHT on Bank Transactions be adopted which has disrupted the entire supply chain.
He was of the view that the aforementioned proposal was the best option available to ensure broadening of tax base while the representatives of trade and industry will not have any substantial ground to oppose it. The measure will bring the prevailing uncertainty among the trade and industry to an end and will allow both FBR and the business community to focus on their respective role, he added.
President KCCI noted that despite various meetings between representatives of Chambers and trade organizations, Ministry of Finance and Federal Board of Revenue (FBR) during last two months, the issue of 0.3 percent Withholding Tax on banking transactions has not been resolved to the satisfaction of stakeholders. The imposition of 0.3% WHT on bank transactions has resulted in a slowdown of business activities and decline in bank deposits.
He informed that a number of delegations representing various sectors of trade and Industry have held meetings with the President and office bearers of KCCI to highlight the problems arising out of 0.3 percent WHT on bank transactions and its impact on their business which has slowed down significantly. Most of the manufacturers, distributors and wholesalers are facing a squeeze on cash flow because their customers are holding the payments or making partial payments of small amounts. Consequently their business activities have suffered losses, he added.
“While KCCI fully supports the efforts to broaden the tax-base and bring the non-filers into tax net, it is deeply concerned about the approach and means to achieve this objective through indirect taxes on bank transactions”, Iftikhar Vohra said, “Recent statements by Member-IR, Federal Board of Revenue clearly suggested that the purpose of imposing 0.3 percent on bank transactions is not to generate more revenue but to broaden the tax base and bring the unregistered persons into the tax net.”
He was fairly optimistic that the goal of broadening the tax base can be achieved without imposing WHT on bank transactions.
Iftikhar Vohra hoped that the KCCI proposal for resolving WHT issue submitted to Ministry of Finance receives positive consideration in the best interest of all stakeholders.