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Finance minister assures banks of revisiting super tax

Business

May 10, 2018

ISLAMABAD: Finance Minister Miftah Ismail on Wednesday assured the banking sector of revisiting super tax and other measures proposed in the budget for the next fiscal year of 2019.

“Government would accord due consideration to the proposals put forth by the banks’ officials and accommodate them to the extent possible,” Minister Ismail said during a meeting with senior officials of various banks. “Banking sector has a key role in development of the economy.

It also has an important contribution in promoting the cause of financial inclusion besides providing financing facilities to business community, industrial sector and different commercial activities.”

Finance minister said government would encourage and facilitate banks to bring up new attractive packages and products for the customers.

Special Assistant to Prime Minister on Revenue Haroon Akhtar and senior officials

of the finance division and the Federal Board of Revenue also attended the meeting, according to a statement.

Banks’ officials urged the minister to ease taxes on banking sector to help it enhance their financing ability and give a boost to economic activities in the country.

Previously, Pakistan Banks’ Association advised the government to abolish four percent super tax on banks in the next fiscal year as it hurts their profitability.

The government slapped super tax on corporate sector in 2015 for rehabilitation

of internally displaced persons.

It was continued in 2016 and 2017. Currently, banking companies pay four percent and non-banking companies three percent as super tax. The government proposed the tax to gradually be reduced by one percent from the next fiscal year for both banking and non-banking companies.

Credit rating agency Moody’s and brokerages anticipated that the tax would likely to erode banking sector’s profitability.

Brokerages said the tax is expected to cause up to seven percent decline in banking profits in 2018.

The banking sector’s profitability continued to fall due to low interest rate environment since November 2014. The central bank raised policy rate by 25 basis points to 6 percent in January after keeping it unchanged since May 2016.

Topline Securities said profits of listed banks were down 18 percent year on year to Rs39 billion in January-March period of 2018 mainly on account of one time pension cost and lower capital gains recorded during the quarter.

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