Budget 2017-18: Super Tax Maintained on Banking Companies

The last budget of PML-N has not given relief to banking sector as Super Tax of 4 percent has been extended  for the next tax year.

According to Finance Bill for the financial year 2017-18, Super Tax is levied at the rate of 4% on the income of Banking Companies and at the rate of 3% for other persons.

The circumstances which necessitated introduction of Super Tax are still continuing, therefore, it is proposed to extend the levy of Super Tax by one more year, i.e. for the tax year 2017-18.

Super Tax was introduced in the budget for financial year 2015-16. Since then, it continued to hurt the earning of the banking companies, however during last one and half years — when the lower policy rates squeezed interest income of the banks — the tax has taken toll to the profitability of the banks.

According to an estimate, the government would earn nearly Rs 25 billion extra from the Super Tax on the banking companies.

It is pertinent to mention that the Federal Government imposed super tax in 2015-16 for the purpose of rehabilitating temporary displaced persons (TDP) affected by the Army’s Operation Zarb-e-Azb.

Not to mention, 90% of the TDPs have returned to their homes.

The continuation of Super Tax for banking companies highlights government’s woes with respect to reining its fiscal deficit for 2017-18 and continuation of another military operation “Radd ul Fasaad”.

Exemption of Withholding Tax for Branchless Banking Transactions

The government has given a sigh of relief to branchless banking sector through exemption of withholding tax on cash withdrawal on branchless banking channels.

Accordingly, agents could save their amount from deduction from the account maintaining in their microfinance/ commercial banks.

The exemption of withholding tax had been a long pending demand from branchless banking companies because the requirement of cash is inevitable for agents who used to suffer extra cost while paying additional tax on the withdrawals of above Rs 50,000.

In order to promote digital payments in the country and to assist in the realization of the long term vision of Universal Financial Inclusion in Pakistan, exemption is being accorded to branchless banking agents operating under the Asaan Mobile Account Scheme from withholding tax on cash withdrawals made for the purpose of making payments to their respective customers.

At present, tax @ 0.3% and 0.6% is deducted upon aggregate cash withdrawals exceeding Rs.50,000 per day from filers and non-filers respectively.

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