Increase in Tax on Cash Withdrawals from July 2024

Increase in Tax on Cash Withdrawals from July 2024.

Cash Getting Costlier in Pakistan? Proposed Tax Hike on Cash Withdrawals for Non-Filers from July 2024

Pakistanis, especially those who don’t file tax returns (non-filers), might soon see a rise in the cost of withdrawing cash from ATMs and banks.

Here’s a breakdown of the proposed tax increase and its potential impact:

Why the Hike?

As Finance Minister Muhammad Aurangzeb presents the highly anticipated Budget 2024-25, one of the key proposals involves a tax increase on cash withdrawals for non-filers.

This move aims to boost government revenue and potentially secure a crucial bailout package from the International Monetary Fund (IMF).

What’s Changing?

The government hopes this tax increase will achieve two key objectives:

Encourage Tax Filing: By making cash withdrawals slightly more expensive, the government aims to incentivize non-filers to officially register and file their tax returns. This would broaden the tax base, leading to increased revenue for the government.
Meet IMF Conditions: The proposed tax hike aligns with the IMF’s requirements for a potential bailout package. The IMF often recommends measures to improve tax collection and reduce reliance on cash transactions for greater financial transparency.

Budget 2024-25 Unveils Potential Tax Hike:

Currently, non-filers face a 0.6% withholding tax on cash withdrawals.

The proposed budget suggests raising this tax rate to 0.9%. This means if the proposal is approved, a Rs. 100,000 cash withdrawal will incur a Rs. 900 tax deduction starting July 1, 2024.

Impact on Non-Filers:

Non-filers will undoubtedly bear the brunt of this tax increase, adding to their existing tax burdens. However, the government hopes this will encourage them to join the formal tax system, ultimately benefitting the country’s financial health.

Benefits of Broader Tax Base:

The additional revenue generated from this tax hike can significantly contribute to the government’s fiscal strategy. It can help bridge the budget deficit, promote economic stability, and potentially unlock vital funds from the IMF for crucial reforms and development projects.

The Road Ahead:

As Budget 2024-25 unfolds, the proposed increase in withholding tax for non-filers remains a key point to watch. This measure signifies the government’s commitment to fiscal responsibility and its pursuit of economic reform through increased revenue collection and international financial support.

Stay Informed:

Non-filers who frequently withdraw cash should be aware of this potential change and its impact on their transactions. Keep an eye on official budget updates for confirmation of the tax increase and explore alternative options like digital payments or mobile banking to potentially minimize the impact.

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