The government is expected to pass a mini-budget soon in order to meet international lenders’ prior actions and taxation requirements for the current fiscal year.
According to highly placed government officials, the mini-budget will focus on “targeted taxation” to increase the incidence of tax on sectors earning windfall profits, specifically the banking sector.
Finance Minister Ishaq Dar has not yet decided whether to implement a mini-budget. However, some banking-related proposals have been developed. The proposals would be implemented following the formal approval of Finance Minister Ishaq Dar, who is still opposed to introducing a mini-budget. The final decision would be made based on the FBR’s tax collection position at the end of the current month.
One of the mini-proposals budget’s is to tax the banking sector’s profits. Bank profits from government securities, as well as foreign exchange earnings, are proposed to be taxed. The Finance Minister and Prime Minister must approve this proposal.
The banking sector has already been heavily taxed as a result of the Finance Bill 2022 and subsequent amendments to the Finance Bill 2022. The revenue impact of imposing a super tax on large industries/sectors, including banks, was estimated to be Rs. 80 billion in 2022-23, generating an additional Rs. 466 billion in revenue.
Through an amendment to the Income Tax Ordinance 2001 via Finance Act 2022, the tax rate on banking companies’ income was raised to 39 percent for the tax year 2023 from the current 35 percent.