The Federal Board of Revenue (FBR) has reportedly suggested that the withholding tax on withdrawals from banks be raised from 0.6 percent to 1.2 percent for non-filers. This move intends to boost the federal government’s revenues for the upcoming fiscal year (FY) 2025-26.

 

A reputable news platform was informed by sources that the FBR intends to utilise the hike in taxes to “penalise” non-filers. Aside from the aforementioned disadvantage, the government has non-filers in their crosshairs on other fronts too, as Islamabad will reportedly scrap the non-filers category altogether, curtailing their financial freedoms.

 

Reports suggest that non-filers may not be allowed to make financial transactions of any kind. While the government expects its move to broaden the tax net by penalising non-filers, analysts have outlined how this could lead to the rise of unrecorded transactions.

 

This may cause a significant setback to the federal government, which is implementing reforms to transition the economy towards a cashless system. According to reports, in meetings held last week as part of pre-budget consultations, the finance minister pushed for stronger digitisation efforts and a move to limit cash transactions.

 

While the National Assembly Standing Committee on Finance and Revenue intends to curtail transactions made by non-filers in the upcoming Finance Bill 2025-26, it merits a mention that the federal government has not yet provided an official confirmation for the hike in taxes. 

 

Reports suggest that the FBR’s suggestion, if approved, will double the tax rate on cash withdrawals made by non-filers. However, the taxes are likely to be applicable only on cash withdrawals exceeding Rs50,000. Currently, cash withdrawals exceeding Rs50,000 via either credit or debit cards are subject to a 0.6 percent tax.

 

Reports indicate that withdrawals larger than Rs50,000 will result in the tax amount being deducted from the entire amount. Under a 1.2 percent withdrawal rate, withdrawals amounting to Rs75,000 in a single day will result in non-filers paying Rs900 to the federal government. Similarly, non-filers withdrawing Rs100,000 in a single day will have to face a tax of Rs1200.

 

While the tax seems nominal at first glance, it could prove to be a respectable source of revenue for the government if non-filers continue to use the formal banking system. However, the government will have to ensure that non-filers do not resort to informal channels for transferring cash.