THE recent federal budget document has proposed an increase in the tax rate on interest income from banks and saving schemes. This is unfair as the existing tax rate on such income already happens to be 15 per cent for filers of tax returns, and a pretty hefty 35pc for non-filers. It is frustrating that nothing is done to widen the tax net, and the entire focus remains on further squeezing those who are already paying taxes.
The step, if approved by parliament, will certainly discourage people from keeping large deposits in commercial banks, and they may also withdraw parked investments from the National Savings.
Pakistan has one of the lowest savings rates in the region, and the current move will make things difficult even more.
With insufficient domestic savings, the country relies on external borrowings.
Increased taxation will create a dangerous cycle of debt dependence. On the other hand, people will put themselves at risk by investing in high-risk, untaxed or low-taxed alternative schemes. The worst affected will be the elderly; mostly pensioners and small investors. Keeping in view the prevailing high rate of inflation, this would be unjust for people who rely on income from these two sources.
The federal government and parliament should focus on the welfare of the people.
The Federal Board of Revenue (FBR) should be more realistic, and must rethink its policies. Knee-jerk measures alone will fail to enhance revenue collection.
