The government has established a high-level committee to review fiscal measures related to the ratio of advances to deposits in the banking sector and explore alternative plans to impose a tax on banks’ profits earned from investing in government securities.
Prime Minister Shehbaz Sharif formed the committee, headed by Deputy Prime Minister Ishaq Dar, tasked with resolving the issue of additional 15% income tax imposed on banks with a deposit rate of less than 50%.
Dar supported the tax in June this year, and has resisted efforts to quietly waive it in the Finance Act.
The committee includes the Minister of Finance, Minister of Law, Minister of State for Finance, Attorney General of Pakistan, Minister of Finance, Chairman of the Federal Board of Revenue (FBR), Governor of the State Bank of Pakistan (SBP), and Asma Hamid.
In accordance with its terms of reference, the committee will review the current legal framework related to alternative dispute resolution, communicate with stakeholders in the banking sector, and propose a consensus-based solution.
The committee will also discuss alternative financial plans to tax profits made by banks by investing in government securities.
The committee has been directed to finalize its recommendations and submit a report to the Prime Minister by the end of December.
Ishaq Dar has been authorized to propose legal and regulatory amendments to address this issue.
The government considers this initiative crucial to ensuring sustainable revenue generation while addressing the concerns of the banking sector.