Islamabad: Finance Minister Ishaq Dar turned down on Friday a proposal by the country’s top taxman to tax remittances.
“There is going to be no tax whatsoever on foreign remittances,” the finance minister said, adding that he was irritated by such speculations.
“This confusion must stop. There will be no tax on foreign remittances in the coming budget,” he said at the launch of the National Financial Inclusion Strategy (NFIS).
The minister was apparently angered by a testimony by Federal Board of Revenue Chairman Tariq Bajwa before a Senate panel on Thursday. The FBR chief had suggested that remittances needed to be brought under the tax net to curb conversion of black money into white.
He had told the Senate committee headed by Salim H. Mandviwala that the FBR already had consultations with the State Bank and a proposal would be submitted to the federal cabinet to restrict unmonitored flow of remittances by making some changes in Section 111 (4) of the Income Tax Ordinance.
Finance Minister Dar said he could not wait until the June 5 budget presentation to announce that remittances from overseas Pakistanis remained exempted from tax. He said he would not accept any such proposal from the FBR, adding that he wanted to make it clear that there was no plan under consideration to levy any kind of tax on home remittances.
“Home remittances are very stable source of foreign exchange flows into the country and represent the hard work of millions of Pakistanis living abroad and their commitment for development of Pakistan,” he said.
On the contrary, he said the government in consultations with the SBP would continue to work for further growth in home remittances and provide a framework where any overseas Pakistani would be able to send remittances to the country easily and at a minimum cost.
Mr Dar said there was a substantive growth in foreign exchange reserves of the country which would ensure stability in the market and improve balance of payment position.
He also ruled out a proposal to increase monthly stipend of beneficiaries of the Benazir Income Support Programme and said that instead of this he would like to add more families to the social safety network.
The finance minister criticised the speculators betting on the value of the rupee against the dollar and people advocating devaluation of the local currency and said: “It is not anyone’s business to determine the value of the rupee; the rupee-dollar parity is determined by demand and supply factors and market forces.”
Mr Dar said that after averting a default on foreign loan repayments and then stabilising the economy in two years, the government’s next goal was revival of growth and certain measures would be announced in the budget to achieve this objective and ensure jobs creation and poverty reduction.
He said the current year’s 5.1 per cent growth in real GDP could not be achieved because of floods, political upheavals and a reduction in commodity prices.
He said the NFIS was aimed at building momentum and pushing forward reforms to achieve universal financial inclusion in an integrated and sustained manner. He said there was a strong need to enhance access to fair and dignified financial services to achieve a sustainable economic growth.
SBP Deputy Governor Saeed Ahmad said that about 50pc population had been financially excluded with no access to services such as formal savings, payments, deposits and credit and, therefore, financial inclusion was a priority area of the government and the central bank.
Richard Montgomery, the head of UK’s Department for International Development, said there was a financing gap of $1.6 billion in implementing the targets set under the NFIS, requiring an active participation of public and private sectors to bridge the gap.
The UK department has played a major role in introducing the NFIS in Pakistan.
