According to data released by the State Bank of Pakistan, investment in premium prize bonds saw a sharp increase of 29%.
Investment in premium prize bonds of Rs. 40,000 denomination increased to Rs. 5.96 billion by the end of February 2019, as compared with Rs. 4.62 billion in the same month of the last year after the government stopped issuing the unregistered instrument to stop the expansion of the black economy.
Previously in February, the federal government had decided to discontinue Rs. 40,000 denomination national prize bonds by February 15th, 2019, which were to fill the gap that had long been used by people to whiten their black money.
Investment in the unregistered Rs. 40,000 bonds was at Rs. 259.2 billion by February 2019, as compared with Rs. 225 billion in the same month a year ago.
SBP’s data shows that total investment into unregistered/undocumented prize bonds had increased to Rs. 939.12 billion by February 2019, as compared with Rs. 803.52 billion in the same month a year ago.
SBP also advised the Central Directorate of National Savings (CDNS) to stop printing unregistered Rs. 40,000 prize bonds.
A member of Tax Reform Committee (TRC), which was constituted by the former government in 2014, on said on Wednesday that it was recommended by the TRC to stop the circulation of high denomination prize bonds.
The member said the committee had presented its report in May 2015 and advised the finance minister at the time that high denomination prize bonds were a major source of expansion of the black economy.
The TRC had recommended documenting high denomination prize bonds of Rs. 25,000 and Rs. 40,000 and to issue them against CNICs of individuals. However, it would not affect the already issued prize bonds. The government intends to expand documented prize bonds in other denominations as well on the recommendations of the TRC, the member said.
The committee also recommended that prize bonds of these denominations should be allowed to be deposited in bank accounts with a withholding tax of 0.1 percent. “Tax so deducted on the prize bonds should be made adjustable and the evidence of tax deduction will suffice the purpose of documentation,” the report added.
The TRC member said that the committee had repeatedly asked the previous government to implement this measure, but no decision was taken in this regard. “But now under international obligation, the government is taking such measures to stop money laundering and terror financing,” the member said.