KARACHI: With the sudden withholding tax levied on exchange companies that have received notices worth crores of rupees from the Federal Board of Revenue (FBR), the dollar value may cross Rs 200.
Representatives of exchange companies told dawn On Wednesday, he is receiving notices from the FBR for non-payment of withholding tax withdrawn in 2016.
The tax notice has created panic among the exchange companies, while their representatives say the additional cost will be passed on to the customers, which could push the dollar rate to more than Rs 200.
“Exchange companies are getting notices to pay up to Rs 1 billion in withholding tax. It was implemented in 2014 and withdrawn in 2016,” said Malik Boston, president of the Exchange Companies Association of Pakistan.
He said companies will pay 16pc withholding tax to customers who will have to bear an additional cost of up to Rs 20 per dollar. This would result in an exchange rate of Rs 200 or more.
“It looks like a conspiracy against the government. There is a lot of pressure on the exchange rate. The government is already facing criticism because of the devaluation,” he said.
Exchange companies say they will have tax impact on customers
If the dollar reaches Rs 200, the black market will replace the legal business of the exchange companies, he said.
“The gray market has already taken a large part of our business. It offers a higher price. Dollars are being sold at high rates to smugglers, hawala people and Afghans,” said Zafar Paracha, who runs one of the largest exchange companies in the country and also serves as the general secretary of the same association.
An ‘A’ category exchange company which did not wish to disclose its identity shared its FBR notice dawn, It showed an amount of over Rs 1 billion in withholding tax. The exchange company said it would take it to the money market and the dollar rate would skyrocket. On Wednesday, the dollar had closed at Rs 178.30.
Mr. Boston said there is no point in imposing a withholding tax because the market is already volatile and the government is under pressure. “In a meeting with the FBR chairman, we informed him about the consequences of 16PC withholding tax,” he said.
He said the chairman of FBR assured the exchange companies that the notices would be withdrawn and the companies would not face any harassment at the hands of the taxpayers.
In recent days, exchange companies have faced several restrictions regarding their sales, although their businesses are fully documented, he said.
In view of the Financial Action Task Force, the government along with the State Bank of Pakistan took these measures to regulate this business. Pakistan complies with most of the requirements of the FATF, although it is still on the gray list of surveillance which forces the concerned authorities to keep this business under tight control.
Also the government wants gain control over the outflow Dollar country.
Published in Dawn, January 20, 2022