The government is considering imposing a 50% to 70% Windfall Tax on banking profits, similar to the one used in the West on energy companies.
Different proposals are being considered to impose a Windfall Tax on bank profits. Banks’ high profits could be taxed between 50% and 70%, officials told the publication on condition of anonymity.
Federal Board of Revenue (FBR) sources say the government has not approved the proposal. However, Finance Minister Ishaq Dar hinted on Wednesday that the government would proceed with the Windfall Tax on the banking sector.
The government is calculating bank profits from recent currency manipulation. As a result, policymakers may impose a tax that won’t choke the banking industry.
The tax officials working on this proposal studied the Windfall Tax imposed by the UK, Austria, Italy, Australia, and other countries after the Russia-Ukraine war. The respective governments imposed the Windfall Tax to generate revenue. Even the Biden administration threatened Windfall Tax.
The recent energy crisis in Europe caused by COVID-19, poor market decisions, and the Ukraine war has driven up energy prices.
Due to limited supplies, Europe built up gas reserves in anticipation of a cold winter. As a result, some governments considered country-wide blackouts and energy rationing to ensure enough gas to heat homes.
“The government expects to generate Rs25 to Rs35 billion from a 50% to 70% fixed tax rate on bank profits,” said an official.
The government may exempt basic food items and raw drug materials from the proposed Flood Levy.
The import levy could be 1% to 3%. As a result, the government could earn Rs60 billion in the remaining six months of 2022-23.
Sources say the government will prefer the Flood Levy because it won’t become part of the Federal Divisible Pool (FDP) under the NFC Award for distribution among the provinces.
The FBR aims to collect Rs7,470 billion in taxes this fiscal year and has collected Rs3,428 billion through December.
Now the tax authorities must collect Rs4,042 billion by June 30, 2022.
