ISLAMABAD: The government and traders on Friday agreed, in principle, to further lower the withholding tax rate on banking transactions by non-filers to 0.2% while increasing for an interim period the tax-free transaction threshold to Rs100,000.
Both sides also agreed to review the possibility of charging fixed income tax from traders aimed at facilitating their entry in the formal economy, according to Federal Board of Revenue officials.
However, there were no signs of a concession on the major demand of traders: a tax amnesty scheme to whiten undeclared assets. The last round of talks was led by Finance Minister Ishaq Dar in which both the sides agreed in principle that the withholding tax rate will be further lowered to 0.2% as an interim arrangement. The arrangement will last till December 31, after which it will revert back to 0.6%.
Punjab Chief Minister Shahbaz Sharif also met Dar on Thursday, urging him to address the traders’ concerns before Sunday in order to win their votes for the by-election in NA-122. Shahbaz wanted a deal to be agreed upon with traders, but Dar has his own limitations, particularly IMF opposition to any amnesty scheme.
Representatives of traders and the government will meet again on Wednesday to finalise modalities, said Dar after the talks with traders. The agreement will be announced only after bringing the estranged traders to the negotiating table, officials said. If the traders remain divided, the agreement will not be announced, they added.
Divisiveness among traders remains a major obstacle to the early finalisation of the concessions package, according to a negotiator. On Friday, two traders’ groups separately met with government officials.
Final modalities were discussed with the Naeem Mir group, which had also earlier signed an agreement with the government but later on backtracked when the Khalid Pervez Group demanded complete withdrawal of withholding tax on banking transactions.
However, Naeem Mir group is ready to accept the levy, provided the government gives an amnesty scheme on undeclared assets. 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.