The Pakistan Banks’ Association has asked the government to rationalize the income tax rate for the banking institutions in the federal budget. Previously, the government had reduced the income tax rate for the corporate sector from 35 percent in 2013-14 to 32 percent in 2015-16 without offering the same concessions to the banking institutions. The successive governments in Pakistan have so far failed to introduce much-needed structural reforms in tax collection system and other fields of economy. The reforms are not only demanded by the local business community, but also by foreign investors. According to the association, the government has gradually reduced income tax rates for the corporate sector but such a concession has not been provided to the banking sector.
The association also wants that Section III (4) of the Income Tax Ordinance 2001 be deleted and Protection of Economic Reforms Act (PERA) (1992) be amended by excluding all persons residing in Pakistan as these sections provide immunity to a taxpayer on declaring the source of money remitted through banking channels from abroad in the shape of foreign exchange. It is believed that the repeal of the sections will help curb the practices of money laundering to a larger extent in the country. The banking association also wants the Federal Board of Revenue to raise the threshold of transactions up to Rs100,000 while unnecessary disclosures of customer information under the Income Tax Ordinance, 2001, Sections 165 and 165 A, should also be avoided. It says the move will enhance financial inclusion in the country. The banking institutions are also unhappy with the issuance of notices by the board for 16 percent federal excise duty on banking services along with imposition of sales tax on the same services by the respective provinces.
The association says that an additional sales tax of five percent has also been imposed through the amendment to Sales Tax Rules 2006 and unregistered persons are made to pay 17 percent sales tax on electricity and gas bills. As a matter of fact, indirect taxes are the curse on the people of this country as the rates of taxes are increased one way or the other with the passage of time. Payment of taxes on certain income limits are mandatory in every country, but problem is in slabs, tariffs and the collection procedure. The ultimate victims of indirect taxes are the common people. If this situation goes on, the concept of Pakistan as a welfare democratic country will remain a distant dream.
