The government is coming up with a package under which it has decided to merge a tax loophole from which banks have been availing themselves to avoid paying Rs200 billion in taxes every year. Under the new policy, it would be included in the upcoming budget and help encourage the banks to lend more to the private sector, thus boosting the economy.
Federal Board of Revenue chairman Rashid Langrial elaborated the plan in a meeting with the Senate Standing Committee on Finance. In this new method, the tax levy will not be calculated on the balance sheets of the banks on December 31 but on their average lending throughout the year. The change will prevent the banks from doing some last-minute sparring to come down on their tax bills.
The government introduced this tax in 2022 aimed at compelling the banks to start promoting private sector lending rather than relying on financing from the government. However, some banks have found a way around this tax by changing their strategy of lending, and that is something that the government would like to end. If banks fail to hit their targets on lending for the private sectors, they are at risk of attracting the levies to the tune of 15%.
The committee was also concerned with the fact that the country was heavily dependent on such financing from banks to finance its budgetary deficit. They called for the need of expedient improvement of private sector involvement for inducing economic growth.
