Punjab govt raises card payment tax, marking it 50% relief

LAHORE: The Punjab government has been readily caught running another tax relief scam as it pushed up sales tax on digital payments by 66% on account of its marketing as “50%” tax relief for consumers.

As against, it tried to pass off as if digital users would be getting tax relief of 50% on the basis that sales tax on their purchases done through digital payments would now be at 8% vis-à-vis sales tax at 16% on purchases done through cash.

As tax expert Amer Sharif informed ProPakistani: “This is just manipulation of numbers by comparing a new 8% on digital payments to the old 16% rate on cash payments without bothering about the fact that the rate of tax on digital payments itself has been increased from 5% to 8% by the Punjab Government”.

He was also pointing out that the old tax structure itself will have a higher tax burden for cash users of 16% as against only 8% tax Burden for Digital users, so to compare the new tax burden for Digital payment with the old cash-based tax rate will be totally unfair.

According to the new structure, users making payments via credit/debit card or any other digital channel will be taxed at 8%, whereas those who pay in cash will be taxed at 16%.

However, the government has been heavily marketing this as “50% tax relief”. The Government of Punjab wanted to encourage digital payments and bring in better tax documentation among consumers who do not use cash to pay digitally for items/services.

The objective of promoting the digital payment system and documentation through this initiative is welcome, but implementation has not been optimal.