Karachi—The budget 2016-17 in a bid to promote agriculture and exports ignored the important factor of keeping a balance in its approach for providing equal opportunities to other sectors specially the banking sector which fuels the engine of economic growth of the country. The Pakistan Banks’ Association (PBA) while congratulating the government on presenting a growth oriented budget, with special emphasis on growing two important sectors, i.e. agriculture & exports, but has, unfortunately, over looked the needs of the important sector of banking.
The Association has expressed its disappointment that the Federal Board of Revenue has overlooked its recommendations for the federal budget 2016-17 for the banking sector despite the fact that this sector cumulatively pays amongst the highest amount of taxes to the national exchequer. Banks paid total taxes of Rs121 billion for the year ended December 2015.
In addition, withholding tax of Rs105 billion was collected and paid to the FBR for the year ended December 2015. The one-time imposition of super tax on the banks’ tax income for 2015 has been re-imposed again at 4 percent for banks and 3 percent for other tax payers. Also, by disallowing depreciation and business losses that are brought forward, the effective tax rate has further gone up.
The PBA says that while the government has taken a positive step by reducing income tax rate for business income of the corporate sector from 33 per cent to 32 per cent for tax year 2016 and further down to 31 per cent for tax year 2017, unfortunately, the income tax rate for banks has still not been rationalized and continues to be levied at the higher rate of 35 per cent. This anomaly needs to be immediately corrected. The PBA has said that the advance tax installment payment interval has also been retained on a monthly basis for banks while it is quarterly for other sectors.