The federal government is considering withdrawing the 4% supertax imposed on banking companies for the tax year 2018.
The banks had asked the government to withdraw the tax in the second supplementary finance bill which was unveiled in January this year.
However, the final decision will be taken on Monday (March 4th) in a high-level meeting to be chaired by Finance Minister Asad Umar, quoted a local English newspaper.
Moreover, FBR has warned that such a decision will widen the revenue shortfall by Rs. 22 billion, which is already huge.
FBR officials revealed that the revenue board had already forwarded a summary containing all details to the finance minister. “Now, the final decision will be taken by the government,” an official said.
The demand for withdrawal of super tax was sent to the finance minister by Pakistan Banking Association (PBA) Secretary-General and Chief Executive Officer Taufeeq A Hussain as stated by the report.
The Finance Minister had assured PBA members that an amendment would be introduced in the supplementary finance bill.
If an amendment is to be introduced, the finance minister will have to submit a note to the National Assembly speaker. The note, however, had not been submitted until Friday evening.
According to the proposed amendment, banks should be provided a tax relaxation on extending the number of loans to agriculture, housing, micro, small and medium enterprises, and other priority sectors.
For the tax year 2018, the government did not impose any super tax on banking companies but now it has levied a 4% tax.
Since the banking year 2018 has ended in December, banking companies will be liable to pay 8% supertax instead of 4% in the tax year 2019. Hence, banks have demanded an exemption from 4% super tax for the tax year 2018.
The PBA has agreed to extend loans to the priority sectors in exchange for the tax relief.
If the second supplementary finance bill is approved without amendments, the banking companies will be liable to pay 4% super tax for the tax year 2018 and another 4% for the tax year 2019.