The continuation of the additional 15% income tax on banks in Pakistan is anticipated following Prime Minister Shehbaz Sharif’s directive on Thursday to sustain the levy. The decision to uphold the 15% Bank Tax aligns with the government’s completion of new tax measures, anticipated to be announced during the National Assembly’s approval of the 2024-25 Budget today.
Cabinet members confirmed the Prime Minister’s involvement after backlash against proposed tax reliefs for banks, which have profited significantly from the finance ministry’s high demand for loans.
Deputy Prime Minister Ishaq Dar advised the Prime Minister on the tax relief issue, recommending continuing the 15% tax for the next fiscal year. The government anticipates borrowing Rs24 trillion and spending another Rs9.8 trillion on interest payments.
Read: Pakistan to Abolish 15% Additional Tax on Bank Profits Amid Fiscal Pressures
Banks, however, contend that the additional tax on their loans to the government is unfair, arguing that their lending is not coercive.
This development follows reports that the government considered abolishing the tax, which could potentially benefit banks that made Rs960 billion in profits last year.
The Finance Minister did not confirm whether the proposal was excluded from today’s Finance Act.
The banks’ average Advances-to-Deposit Ratio (ADR) is 41.8%, implying a 10% income tax. The top lending banks, investing heavily in government debt, have exploited tax loopholes by adjusting lending around tax deadlines. Like past actions, the government could close this loophole through regulatory orders.
