World Bank drops proposal to levy WHT on foreign exchange accounts

[Naveed Yaseen]

SOHAIL SARFRAZ
ISLAMABAD (January 16 2009): The Federal Board of Revenue has been able to convince the World Bank for not levying withholding tax on foreign currency accounts, as the proposal is counterproductive for the economy. Sources told Business Recorder on Wednesday that the WB had proposed to the FBR for extending withholding tax on withdrawal of cash from banks to foreign currency accounts.

The proposal was recently discussed between the WB officials and tax authorities during review of the Tax Administration Reform Project (TARP). The tax managers informed the WB officials that the proposal would have serious implications on the economy. The WB officials have agreed to the viewpoint of the tax authorities and the proposal has been subsequently dropped.

According to sources, the FBR and WB officials continued to have daylong meeting to review different reform projects on Wednesday. The board is examining different proposals in view of WB's recommendations and a summary on taxation proposals would be moved to the Economic Co-ordination Committee (ECC) of the Cabinet.

The WB also wanted to enhance withholding tax on cash withdrawals from banks. The Board has witnessed substantial growth in withholding tax collection from this head during the first five months of current fiscal year (2008-2009). Over and above 40 percent growth in withholding tax collection from cash withdrawal was due to increase in rates from 0.2 percent tto 0.3 percent in last budget. In budget 2008-2009, tax authorities have projected to collect Rs 2.5 billion as withholding tax on cash withdrawals from banks.

http://www.brecorder.com/index.php?id=864076