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withholding tax on exchange Cos to boost value of dollar to Rs200+, create forex crisis in pakistan: Bostan

Currency dealers said the imposition of WHT would promote the black market and further encourage smuggling of the foreign currency from Pakistan, leading to more pressure on exchange-rate and Pakistan can face crisis of dollars.

ISLAMABAD: Currency exchange dealers in the country are of the opinion that dollar-rupee exchange rate would exceed 200 rupees if the FBR imposed withholding tax (WHT) on exchange companies.

Malik Bostan Khan, chairman of Exchange Companies Association of Pakistan told media that FBR was sending notices to the exchange companies demanding withholding tax.

He said that the FBR imposed WHT on exchange companies and later on abolished it in 2016.

Now the FBR officials are sending notices of millions of rupees withholding tax payment to the exchange companies and if the WHT is not withdrawn, the value of dollar-rupee parity would shoot up beyond 200 rupees in the open market, Bostan said.

Currency dealers said the FBR’s tax notices have created panic among the exchange companies. They said if the companies passed on the buyers the cost of WHT, the value of dollar in the open market would become unbearable for people.

Bostan further explained that the companies will pass on the 16pc withholding tax to customers who will have to bear the added cost of up to Rs20 per dollar. This will result in the exchange rate of Rs200 or higher.

“The WHT on exchange company seems to be a conspiracy against the government because there is lot of pressure on the exchange rate,” he added.

Currency dealers said the imposition of WHT would promote the black market and further encourage smuggling of the foreign currency from Pakistan, leading to more pressure on exchange-rate and Pakistan can face crisis of dollars.

According to dealers the dollar increased on Wednesday (Jan 19) closing above178 and it will further gain value in coming days amid tax controversy.

Meanwhile, Mr Bostan said imposing the withholding tax makes no sense as 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 the 16pc withholding tax,” he said, Dawn.com reported today.

He noted that the FBR chairman assured the exchange companies that the notices would be withdrawn and that the companies would not face any harassment at the hands of the taxmen.

In the recent past, the exchange companies faced a number of restrictions with regard to their sales, although their businesses are fully documented, he said.

The government along with the State Bank of Pakistan took these measures to regulate this business in view of the Financial Action Task Force. Pakistan is in compliance with most of the FATF requirements, although it is still on the grey list of the watchdog that compels the authorities concerned to keep this business under tight control. At the same time, the government also wants to get control of the outflow of dollars from the country.

Javed Mahmood
Written By

I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.

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