ISLAMABAD: The federal government is likely to withdraw 4% super tax imposed on banking companies for tax year 2018.
Earlier, the banks had asked the government to withdraw the tax in the second supplementary finance bill unveiled in the third week of January. Final decision will be taken on Monday in a high-level meeting to be chaired by Finance Minister Asad Umar.
The Federal Board of Revenue (FBR), however, has warned that such a decision will widen the revenue shortfall by Rs22 billion, which is already at its peak.
The demand for withdrawal of super tax was sent to the finance minister by Pakistan Banking Association (PBA) Secretary General and Chief Executive Officer Taufeeq A Hussain. The PBA executive was not available for comments.
PBA representative Kamran Ahmed, however, confirmed that such a demand was made in a letter sent to the finance minister after he agreed to consider the proposal in a meeting held with a PBA delegation.
Umar assured PBA members that an amendment would be introduced in the supplementary finance bill.
China’s central bank to take steps for multi-level capital market
FBR officials revealed that the revenue board had already forwarded a summary containing all details to the finance minister. "Now, final decision will be taken by the government," an official said.
According to a senior FBR officer, there are chances that parliament would carry out voting on the supplementary finance bill. If an amendment is to be introduced, the finance minister will have to submit a note to the National Assembly speaker. The note, however, had not been submitted till Friday evening.
According to the letter, a PBA delegation met State Minister for Revenue Hammad Azhar and FBR Chairman Jehanzeb Khan on February 7 to discuss the issue of super tax on banking companies.
A comprehensive meeting was also held on February 11 with members of the FBR Inland Revenue Policy.
Bank account facility for refugees to aid economy
According to the proposed amendment, banks should be provided tax relaxation on extending the amount of loans to agriculture, housing, micro, small and medium enterprises and other priority sectors. For tax year 2018, the government did not impose any super tax on banking companies but now it has levied 4% tax.
Since banking year 2018 has ended in December, therefore, banking companies will be liable to pay 8% super tax instead of 4% in tax year 2019. Hence, banks have demanded exemption from 4% super tax for tax year 2018.
The PBA has agreed to extend loans to the priority sectors in exchange for the tax relief.
If the second supplementary finance bill is approved without amendments, the banking companies will be liable to pay 4% super tax for tax year 2018 and another 4% for tax year 2019.
On the other hand, the federal government proposed 2% super tax on non-banking and other companies as well as high-income individuals for the next two years. High-income individuals and non-banking and other companies will be required to pay 1% super tax in tax year 2020.
Published in The Express Tribune, March 2nd, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.