The federal government will now try to overturn a stay order granted by the Islamabad High Court (IHC) against a 15 percent additional income tax on bank lending at the Supreme Court of Pakistan.
The Federal Board of Revenue (FBR) is preparing a Civil Petition for Leave to Appeal (CPLA), aiming to meet a critical tax recovery deadline for November. The stay order has complicated efforts to address a Rs. 190 billion shortfall in the first four months, reported Express Tribune.
The disputed tax will discourage banks from over-investing in government debt rather than lending to private industries. Currently, the normal tax rate for banks is 39 percent, but those with an advances-to-deposit ratio (ADR) below 40 percent face a 55 percent tax rate on government debt investments.
It has been determined that banks would have to pay Rs. 197 billion for going too far in giving loans to the federal government. However, the actual collection may fall short as banks impose withdrawal fees on large deposits to reduce their tax liabilities ahead of the December 31 deadline.
The case is set for a December 3 hearing and the government has secured legal representation.
The additional tax was reinstated in January 2024 after being suspended for 2023 under pressure from banks. The government has prioritized resolving the legal challenges surrounding the tax, alongside pending super tax cases involving Rs. 150 billion.
Get the latest business news, market insights, and economic updates wherever you prefer.
Add ProPakistani to Preferred Sources and see more of our stories in Google Search and Top Stories.