Islamabad, Pakistan: Banks in Pakistan are facing an additional income tax liability of Rs197 billion due to excessive lending to the federal government.
The tax advisory firm Tola Associates estimated that 27 domestic and foreign banks operating in Pakistan will be affected by this additional tax. The tax is imposed on banks with an advance-to-deposit ratio (ADR) below a certain threshold.
Many banks are likely to face the 15% additional income tax rate as their ADRs fall below the required threshold. The government has previously suspended the additional tax but has since reintroduced it. Express Tribune
Banks are now lobbying for an exemption from the additional tax, citing the challenges of lending to the government and the high tax burden. However, the government has been reluctant to grant exemptions, especially in light of the IMF loan program.
The government’s decision on whether to grant the exemption will have significant implications for the banking sector and the overall economy.
