Banks’ association expresses deep reservations about new finance bill
Says asking banks to divulge information will do more harm than good.
Government’s new tax measures will actually encourage a brain drain, instead of achieving the opposite. PHOTO: FILE
LAHORE:
The Pakistan Banks’ Association (PBA), in a letter addressed to the minister for finance, has expressed reservations about the Finance Bill 2013-14, a copy of the letter revealed.
The letter, issued with the stamps and signatures of PBA President Atif R Bokhari and Vice Chairman Atif Bajwa, states that the banking sector keeps very strong levels of documentation regarding customers, especially with regard to ‘know your customer’ and ‘anti-money laundering’ procedures.
It reiterates a commitment on behalf of commercial banks to continue assistance to the government in instances where there is evidence of tax evasion or alleged wrongdoing. However, the letter complains, the current amendments – which seek a blanket provision of information – compromise the secrecy of bona fide banking transactions, which is one of the hallmarks of the banking industry.
The letter raises a grave issue. It states: “Given the current law and order situation in the country, kidnappings for ransom have become a source of huge concern for individuals who, in fact, take great pains to lead an understated lifestyle. We fear that open access to the confidential information of banks’ databases could seriously compromise the personal security of [such] customers, through leakage of such information to criminals. This will ultimately result in loss of trust in the banking sector by depositors.”
The government’s proposed amendments require the monthly reporting of deposits into customer accounts, details of credit card spending by individuals and withdrawals from customer accounts. These measures, the PBA says, will provide disincentives to documentation and encourage a cash economy, as customers would not want the details of their bona fide transactions disclosed.
“This would consequently also lead to drastic decline in the acceptance of credit cards as a whole. Ultimately, this will lead to dollarisation, avoidance of banking channels and flight of capital out of Pakistan,” the letter warns.
The letter reminds authorities that banks are already providing required customer information in case a notice is received from tax authorities regarding instances of tax evasion. It also points out that such a change in regulation cannot be made under the cover of a finance bill, as it is a settled law.
The PBA has also complained that the financial services sector has not been considered for a reduction in taxes applicable on it, despite the fact that the corporate tax rate is to be reduced to 30% over the next five years. It has requested a “level playing field for corporate entities, including the banking sector.”
The PBA says it is “disappointed that there has been a dramatic reversal in the tax regime for salaried taxpayers”. It says that it is unfair that the group of people who have consistently and honestly paid taxes are being continuously squeezed.
It also questions the government’s claim of wanting to attract professionals and talented individuals to the country, particularly for the purposes of achieving success in its privatisation programme; asking how this will be possible if highly talented salaried individuals are increasingly burdened with taxes.
It says the government’s tax measures will actually encourage a brain drain, instead of achieving the opposite.
Lastly, the body has expressed concern over the introduction of the income support levy of 0.5% on net moveable assets. It argues that moveable assets represent the savings created from already taxed income, and the levy will only disincentivise deposits and investments in the capital markets and reduce overall savings in the country.
Published in The Express Tribune, June 21st, 2013.
The Pakistan Banks’ Association (PBA), in a letter addressed to the minister for finance, has expressed reservations about the Finance Bill 2013-14, a copy of the letter revealed.
The letter, issued with the stamps and signatures of PBA President Atif R Bokhari and Vice Chairman Atif Bajwa, states that the banking sector keeps very strong levels of documentation regarding customers, especially with regard to ‘know your customer’ and ‘anti-money laundering’ procedures.
It reiterates a commitment on behalf of commercial banks to continue assistance to the government in instances where there is evidence of tax evasion or alleged wrongdoing. However, the letter complains, the current amendments – which seek a blanket provision of information – compromise the secrecy of bona fide banking transactions, which is one of the hallmarks of the banking industry.
The letter raises a grave issue. It states: “Given the current law and order situation in the country, kidnappings for ransom have become a source of huge concern for individuals who, in fact, take great pains to lead an understated lifestyle. We fear that open access to the confidential information of banks’ databases could seriously compromise the personal security of [such] customers, through leakage of such information to criminals. This will ultimately result in loss of trust in the banking sector by depositors.”
The government’s proposed amendments require the monthly reporting of deposits into customer accounts, details of credit card spending by individuals and withdrawals from customer accounts. These measures, the PBA says, will provide disincentives to documentation and encourage a cash economy, as customers would not want the details of their bona fide transactions disclosed.
“This would consequently also lead to drastic decline in the acceptance of credit cards as a whole. Ultimately, this will lead to dollarisation, avoidance of banking channels and flight of capital out of Pakistan,” the letter warns.
The letter reminds authorities that banks are already providing required customer information in case a notice is received from tax authorities regarding instances of tax evasion. It also points out that such a change in regulation cannot be made under the cover of a finance bill, as it is a settled law.
The PBA has also complained that the financial services sector has not been considered for a reduction in taxes applicable on it, despite the fact that the corporate tax rate is to be reduced to 30% over the next five years. It has requested a “level playing field for corporate entities, including the banking sector.”
The PBA says it is “disappointed that there has been a dramatic reversal in the tax regime for salaried taxpayers”. It says that it is unfair that the group of people who have consistently and honestly paid taxes are being continuously squeezed.
It also questions the government’s claim of wanting to attract professionals and talented individuals to the country, particularly for the purposes of achieving success in its privatisation programme; asking how this will be possible if highly talented salaried individuals are increasingly burdened with taxes.
It says the government’s tax measures will actually encourage a brain drain, instead of achieving the opposite.
Lastly, the body has expressed concern over the introduction of the income support levy of 0.5% on net moveable assets. It argues that moveable assets represent the savings created from already taxed income, and the levy will only disincentivise deposits and investments in the capital markets and reduce overall savings in the country.
Published in The Express Tribune, June 21st, 2013.