ISLAMABAD (June 08 2005): The Cabinet did not approve 6 percent withholding tax on locally manufactured cars and 7.5 percent excise duty on fees and commission being charged by banks for services rendered on issuing letters of credit, guarantees, brokering and foreign currency dealings, sources told Business Recorder. Both these proposals were part of Finance State Minister's speech but were withdrawn after State Bank Governor Dr Ishrat Hussain and all ministers opposed these on different grounds, they added.
According to sources, when CBR placed the proposal before the Cabinet that 6 percent withholding tax should be imposed on all models of locally manufactured cars, as it was already being charged on imported cars, most of the ministers opposed the proposal saying that they were already facing criticism from the public and media and if the new proposal was approved and announced it would bring more criticism.
Sources said that CBR wanted imposition of 7.5 percent excise duty on fees and commission charged by banks on services for letters of credit, guarantee, brokering and foreign currency dealings and also levy of excise duty with the same percentage on charges received on account of lease management fee, documentation fee and processing fee at the time of executing lease agreements. However, it was also suggested that lease money and mark-up would be exempted from the tax.
When this proposal was placed before the Cabinet, State Bank Governor opposed it, arguing that this step would hurt the efforts of the documentation of the economy and increase the cost of doing business.