Finance Minister Miftah Ismail on Wednesday assured the banking sector of revisiting super tax and other measures proposed in the budget for the next fiscal year of 2019.
Special Assistant to Prime Minister on Revenue Haroon Akhtar and senior officials of the finance division and the Federal Board of Revenue also attended the meeting, according to a statement.
“The Government would accord due consideration to the proposals put forth by the banks’ officials and accommodate them to the extent possible. The banking sector has a key role in the development of the economy,” Minister Ismail said during a meeting with senior officials of various banks.
“It also has an important contribution in promoting the cause of financial inclusion besides providing financing facilities to the business community, industrial sector and different commercial activities.” He added.
Finance minister said the government would encourage and facilitate banks to bring up new attractive packages and products for the customers.
Bank officials urged the minister to ease taxes on the banking sector to help it enhance their financing ability and give a boost to economic activities in the country.
Previously, Pakistan Banks’ Association advised the government to abolish four percent super tax on banks in the next fiscal year as it hurts their profitability.
Pakistani authorities first imposed the tax in 2015. The tax equals 4% of banks’ taxable income for the last accounting year and is imposed on banks’ semi-annual results.
The government slapped super tax on corporate sector in 2015 for rehabilitation of internally displaced persons.
It was continued in 2016 and 2017. Currently, banking companies pay four percent and non-banking companies three percent as super tax.
The government proposed the tax to gradually be reduced by one percent from the next fiscal year for both banking and non-banking companies.
Last week the Credit rating agency Moody’s and brokerages anticipated that the tax would likely to erode banking sector’s profitability. It was rated negative as it will continue to weigh on banks’ profits and add to ongoing profitability challenges, reported Moody’s.
Taxes on banks’ earnings have added to banks’ ongoing profitability challenges and narrowing margins from lower yields on government securities – in which the banks invest roughly half of their balance sheet – and one-off costs, including higher pension costs.