Pakistan Proposes 1.2% Tax on ATM and Credit Card Withdrawals
Key Highlights:
- Proposed Tax Increase: From 0.6% to 1.2% on daily cash withdrawals exceeding Rs 50,000 by non-filers.
- Effective Date: Starting July 1, 2025, under the Finance Bill 2025-26.
- Scope: Applies to withdrawals via ATMs and credit cards.
- Objective: To enhance tax compliance and increase government revenue.
Background
The Federal Board of Revenue (FBR) has proposed increasing the withholding tax on cash withdrawals by non-filers from 0.6% to 1.2%. This measure targets individuals withdrawing over Rs 50,000 in a single day through ATMs or credit cards.
This initiative is part of the government’s broader strategy to widen the tax net and discourage cash-based transactions among non-filers.
Implications for Non-Filers
- Increased Financial Burden: Non-filers withdrawing Rs 100,000 in cash would see their tax liability rise from Rs 600 to Rs 1,200.
- Encouragement to File Taxes: The heightened tax rate serves as an incentive for individuals to become active taxpayers and avoid additional charges.
- Potential Restrictions: The government is considering eliminating the “non-filer” category altogether, which would prevent such individuals from conducting any financial transactions.
Government’s Rationale
The proposed tax hike is expected to generate additional revenue and promote tax compliance. By increasing the cost of cash withdrawals for non-filers, the government aims to encourage more individuals to file their income tax returns and participate in the formal economy.
