Pakistan senators lash out at extra 4% tax on cash sales over PKR 200,000

Pakistan's Senate Standing Committee on Finance has expressed serious reservations over the imposition of an additional 4% tax on cash sales exceeding PKR 200,000.

During a committee meeting on Wednesday chaired by Senator Saleem Mandviwalla, Senator Mohsin Aziz strongly criticized the Federal Board of Revenue, stating that while the FBR has imposed an additional 4% tax on top of the existing 18% sales tax for cash transactions above PKR 200,000, it has failed to bring undocumented retailers into the tax net.

He stated that the government is penalizing formal businesses and registered sellers, leading to double taxation in some cases, instead of widening the tax base by including small and medium retailers.

Senator Sherry Rehman also voiced serious concerns over FBR's powers of arrest and proposed that a separate in-camera session be held to discuss the issue.

The committee also directed the State Bank of Pakistan to review the Pakistan Remittance Initiative scheme amid concerns that over PKR 100 billion in foreign exchange incentives are being paid to foreign banks to encourage remittances through official channels.

Senator Saleem Mandviwalla raised alarm over the outflow of significant public funds in dollars to international financial institutions. He emphasized the need to reassess the scheme and proposed that instead of offering incentives per transaction, they should be based on the amount of remittance sent.

The committee also recommended that commercial banks issue local "PayPak" debit cards instead of relying solely on international card providers such as Visa and MasterCard, whose fees are paid in foreign currency. SBP was instructed to direct banks to add the option of issuing Pakistani debit cards when opening new accounts.

Senator Mandviwalla pointed out that currently, banks issue cards that charge users in dollars even for domestic transactions, which creates unnecessary pressure on foreign reserves. The committee proposed offering dual card options allowing users to hold PayPak for domestic use and international cards for travel.

SBP Deputy Governor Dr Inayat Hussain informed the committee that by March, around 53 million credit and debit cards had been issued in Pakistan, including 10 million PayPak cards. About 2.5 million of these are compatible for both domestic and international use.

FBR officials grilled

FBR Chairman Rashid Mahmood Langrial told the committee that all forms of political interference in the FBR have been eliminated.

The committee, however, took serious notice of a harassment complaint filed by Senator Afnanullah against an FBR officer.

Senator Mohsin Aziz was assigned to head an inquiry, which will also include two Grade-22 FBR members.

Chairman Langrial assured that if the Grade-18 officer posted at the CTO is found guilty of misconduct, strict action will be taken. He added that instructions were issued on July 2 to all officers to collect only the correct amount of tax and not to overcharge anyone.