Pakistan Banks’ Association recommends tax reduction for banks to 30% and discontinuation of super tax
Karachi, April 04, 2018 (PPI-OT): A set of proposals for Federal Budget 2018-2019 concerning the banking sector has been forwarded to the FBR by Pakistan Banks’ Association (PBA). It has been recommended by the PBA that Section III (4) of Income Tax Ordinance 2001 be deleted and PERA (1992) be amended, by excluding all persons resident in Pakistan and by disallowing deposit of cash dollars into foreign currency accounts of individuals with banks in Pakistan. This will help curb the rampant practice of whitening of money under the umbrella of PERA.
The PBA has recommended that tax rates for all sectors, including banks, be rationalized with uniformity. Accordingly, tax rates for banks should be reduced to 30% for tax year 2019, in line with the corporate sector, and advance tax payment should also be changed from monthly to quarterly for the banks. It has been further recommended that super tax be not extended for tax year 2019 and onwards in the 2018-19 budget.
Currently, Advance tax at the rate of 0.6% (reduced to 0.4% through SROs) has been imposed on all Non-Filers, including those in the vulnerable groups (like widows, pensioners, students, etc.) who are not liable to pay tax where their income falls below the taxable threshold. The tax is also adversely affecting the National Financial Inclusion Strategy. The PBA has recommended that the tax should be removed or at least exemption should be provided to students, widows, pensioners, retirees, etc.
Banks are required to pay advance tax installments on monthly basis. The banks incur heavy cost for these advance payments. For utilizing a heavy amount as advance tax from the banks every month, the government should also pay KIBOR based compensation. On the income so paid by FBR, the banks pay tax @35% presently, which will increase the government revenue.
Through the amendment in Sales Tax Rules 2006, additional sales tax at 5% was imposed over and above the sales tax of 17% on electricity and gas bills on unregistered persons. This additional sales tax should not be charged to a bank’s branch and exemption should be provided.
The audited financial statements of Islamic Banks and Islamic Windows of conventional banks contain a separate disclosure for Islamic Banking business, including a profits and loss statement. The requirement of separate auditors’ certificate for the purposes of rule 3(2) of the Seventh Schedule has no relevance. If this is removed, it would save unnecessary cost and burden on the banks.
To encourage mobilization of deposits for the Micro Finance Banks, tax exemption for “Not for Profit” organizations on profit on debt from scheduled banks, should also be applicable on profit on debt from MFBs. For the year ended Dec 31, 2017, the banking sector paid total taxes of over Rs.139bn and collected, and paid to FBR, withholding tax of about Rs 121bn. Therefore, the total contribution to the exchequer from the PBA members was over Rs. 260bn for that year. The banking industry continues to play an integral role in the economic development of the country. It does this by supporting major initiatives of the government, the FBR and the SBP.
For more information, contact:
Pakistan Banks’ Association (PBA)
D-126 (Near Chinese Consulate), Block 4,
Clifton, Karachi, Pakistan
Category: General Business News