In a move aimed at boosting revenue and securing a crucial bailout package from the International Monetary Fund (IMF), the federal government of Pakistan plans to raise the withholding tax on cash withdrawals for non-filers in the fiscal year 2024-25.
This development is part of the broader fiscal strategy that Finance Minister Muhammad Aurangzeb will outline in the Budget 2024-25, which is set to be presented on June 12 in the National Assembly. The total budget outlay is expected to be Rs18 trillion.
One of the key proposals in the budget is to increase the tax rate on cash withdrawals for non-filers from the existing 0.6% to 0.9%. If this proposal is approved, banks will start deducting Rs 900 on a cash withdrawal of Rs100,000 starting from July 1, 2024. This measure is intended to enhance tax compliance and generate additional revenue for the government.
The decision to hike the withholding tax is part of the government’s efforts to meet the IMF’s conditions for a bailout package. By increasing the tax on cash withdrawals, the government hopes to encourage more people to file their tax returns, thus broadening the tax base and enhancing revenue collection.
Non-filers, who are already subject to a higher tax rate, will face an additional burden with this increase. The government aims to incentivize non-filers to become compliant taxpayers, reducing reliance on cash transactions and increasing transparency in financial dealings. The additional revenue generated from this tax hike is crucial for the government’s fiscal strategy.
It will help bridge the budget deficit and ensure economic stability. By meeting the IMF’s requirements, the government aims to secure the necessary funds to support economic reforms and development projects.
As Finance Minister Muhammad Aurangzeb presents the Budget 2024-25, the proposed increase in withholding tax on cash withdrawals for non-filers is a significant step towards enhancing revenue collection and securing international financial support. This measure underscores the government’s commitment to fiscal responsibility and economic reform.
