ISLAMABAD: The government is considering imposing a windfall tax in the range of 50% to 70% on banking sector profits as used in the West, which imposed the same tax on energy companies, JEE News reported on Friday.
“Various proposals are under consideration to impose a windfall tax on banking sector profits. A fixed tax rate of 50% to 70% is expected to raise revenue from the huge profits earned by banks,” officials said. , who spoke on condition of anonymity, told the publication.
However, sources in the Federal Board of Revenue (FBR) said the proposal is yet to be approved by the government even though Finance Minister Ishaq Dar had hinted in his press briefing on Wednesday that the government would introduce a windfall tax on banking. Will move forward together. Dept.
The government is ascertaining the exact levels of windfall profits earned by the banking sector through recent currency manipulation. Policymakers can impose taxes at a rate that does not threaten to strangle the banking sector.
Tax officials working on the proposal studied windfall taxes imposed by the U.K., Austria, Italy, Australia and other countries on energy companies that made huge profits after the Russia-Ukraine war, so relevant Governments imposed this tax. A windfall tax to generate revenue. Even the Biden administration in the US threatened to impose a windfall tax.
The recent energy crisis across Europe as a result of Covid-19, poor market decisions and the war in Ukraine have pushed energy prices to all-time highs.
Countries across Europe were scrambling to build reservoirs in the face of limited gas supplies to mitigate the effects of the harsh winter. At the same time, some governments were also considering nationwide blackouts and energy rationing to ensure that there was, at least, enough gas to heat homes.
An official said, “The government expects that in case of imposing a fixed tax rate of 50% to 70% on the high profits of banks, the government can collect Rs 25 to 35 billion in revenue”.
On the proposed flood levy, the government may grant exemptions on import of basic foodstuffs and raw materials for essential or life-saving medicines.
Levy on all other imported items may be in the range of 1% to 3%. According to an estimate, the government can get Rs 60 billion in the remaining six months of the current financial year 2022-23.
Sources said the government would prefer the flood levy as it would not form part of the Federal Divisible Pool (FDP) under the NFC award for distribution to the provinces, so the collected money would be used only by the federal government.
On the other hand, the FBR wants to meet the annual tax collection target of Rs 7,470 billion for the current financial year and has so far collected Rs 3,428 billion in the first six months (July to December) period.
Now the tax authorities have to collect Rs 4,042 billion to meet the required tax collection target by June 30, 2022.
