The threshold increase to $200 will make almost 90 per cent of these transactions liable to service charges imposed
LONDON: The latest figures released through official channels show an accelerated growth rate for the country. Remittances and foreign exchange reserves are categorised as two of the four main factors contributing to this accelerated growth. In addition, the current account deficit narrowed by half in just the first 10 months of fiscal year 2014-15 from $2.931 billion to $1.364 billion. Despite these positive trends, the summer promises to bring the banking sector to its knees. Cash withdrawals, demand drafts, pay orders, SDRs, CDRs, STDRs, call deposit receipts and RTCs will be taxed at horrifically high percentages. Taxing small start-ups at 15 per cent of their gross income creates a barrier of entry in an economy where the percentage of start-ups and small businesses is already alarmingly low. In a first world country, a 15 per cent tax on gross income would be considered to have a huge impact on one’s standard of living and choices made after retirement.
Not only will most small businesses be forced to resort to cash transactions, the State Bank of Pakistan (SBP) might also see a decrease in remittances as the rebate allowed to money service businesses (MSB) and local banks on money transfers coming in from abroad has been reduced. The rebate had helped in reducing the use of the hawala system, with most transactions going through the SBP, which meant higher inward remittances and increase in foreign exchange reserves. The reduction in the rebate might force MSBs to look for alternative methods to transfer money from abroad. In addition, the minimum transaction restriction to claim rebates has been increased from $100 to $200. A significant percentage of remittances come from those working overseas. These individuals support their families on a weekly or a monthly basis with the amounts they send home ranging between $50 and $200 on an average. The threshold increase to $200 will make almost 90 per cent of these transactions liable to service charges imposed by MSBs and local banks. This will directly impact remittances and foreign exchange reserves, as people may now be forced to opt for alternative means to transfer money back home. It is requested that these measures are revisited by the authorities concerned as they will only bring hardship to the not so well-off sections of the economy.
Komail Haider
Published in The Express Tribune, July 8th, 2015.
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