After making billions of rupees from withholding tax from non-cash transactions above the value of Rs.50,000, the government has decided to reduce its rate from 0.6 percent to 0.4 percent.
“Tax @ 0.6% is charged on non-cash banking transactions from non-filers. The rate is proposed to be reduced from 0.6% to 0.4% on a permanent basis,” the budget document stated.
In the budget for 2017-18, the government exempted the withholding tax on cash withdrawal for agents of branchless banking who used to do frequent transactions from their accounts for doing business, however, this tax adversely affected their services, hurting the process of financial inclusion.
Besides, this tax is harming the economy rather than generating revenues for the government on short-term basis, according to a study of State Bank of Pakistan.
The target of enhancing tax rate on non-cash transactions (interbank fund transfer) was improving revenue streams, encouraging people to file income tax returns, and discouraging cash economy.
On the other hand, the currency in circulation has been increased markedly, the deposit growth of the banking industry witnessed a drop, and alternate methods were introduced by traders to avoid taxes such as opening of multiple accounts and trading Dollar and Prize Bonds.
Prize Scheme for Overseas Pakistanis
All home remittance transactions sent through commercial banks, exchange companies and other financial institutions will be included in monthly lucky draws.
Details of the scheme are being finalized and shall be announced shortly by State Bank of Pakistan.
Earlier, SBP launched a m-wallet scheme for remittances receivers.
SBP asked branchless banking (BB) players to give free airtime of Rs. 100 to their account holders who arranged to receive remittances of minimum $100 from their overseas senders.
It also allowed banks to open ‘Asaan Remittance Accounts’ of prospective beneficiaries of home remittances on the pattern of an Asaan Account.