The federal government has decided to discontinue Rs. 40,000 denomination national prize bonds, with effect from Friday.
This will fill the gap that has long been used by people to whiten their black money.
According to a local English daily, an internal notification was issued by the State Bank of Pakistan (SBP), which said that it is set to terminate issuance of fresh bonds of Rs. 40,000 denomination from its offices starting from February 15th,
It is to be noted that the only the issuance of new bonds has been stopped, and it will not affect earlier investments.
According to the central bank, any pending requests which will be fulfilled after February 15 will be entertained through re-issuable balance only.
In case of non-availability of re-issuable balance, the applicant will have to opt for other denominations of bonds.
Furthermore, the government will not discontinue prize bond draws that are already scheduled and payments of prize money against winning bonds will also continue.
The central bank issued the instructions after the federal government directed the Central Directorate of National Savings (CDNS) to stop the printing of Rs. 40,000 bonds.
The Rs. 40,000 bond is the highest value prize bond, out of a total of eight denominations, ranging from Rs. 100 to Rs. 40,000. There was Rs. 75 million first prize on the Rs. 40,000 denomination bonds.
This move by the government will also address concerns of the global watchdogs, who remained doubtful about the parking of black money through these bonds.
Till November 2018, there was an investment of Rs. 910 billion in all types of prize bonds. An amount of Rs. 249.5 billion or 27.5% of the total investments alone was in the Rs. 40,000 denomination.
Tax Reforms Commission’s Findings
The report further stated that the Tax Reforms Commission (TRC) set up by the last Pakistan Muslim League-Nawaz (PML-N) government aimed to reform the tax system and had proposed that a new strategy should be adopted on borrowings through prize bonds.
The TRC’s findings showed that the high denomination unregistered bonds were the main source of “corruption and tax evasion”.
The practice involved the purchase of the prize bonds, in addition to possession of the script wherein people get the money whitened, according to TRC findings.
The investment in Rs. 40,000 prize bonds have almost doubled to Rs. 250 billion in the past four years.