The Federal Board of Revenue (FBR) is planning to propose amendments in the Seventh Schedule (Banking Schedule) of the Income Tax Ordinance 2001 in budget (2012-2013).
Sources told?Business Recorder?here on Monday that one of the proposed amendments was to raise tax up to 50 percent on profit earned by banks from deposits made in the government treasury bills (T Bills).
The FBR is of the view that this will help banks divert their investment towards core banking ie, loans for the public or in other words the government wants to encourage banks to give loans to the general public.
When contacted, a tax expert was of the view that the banks income is a composite income and there will be practical difficulties in implementing such a tax measure.
The tax collected at 35 percent is on net income basis and there can be no bifurcation of income earned from ?T Bills? and other securities.
Moreover, the investment in T Bills is also like lending money as the said money is used by the government.
The banks invest in T Bills for only one reason that the rate of return is high and the investment is safe; which is the endeavour of any prudent business person.
This is no way of discouraging the banks; in case the FBR is of the view that the investment in ?T Bills? is to be discouraged they should force GOP to reduce rate of return rather than proposing increased rate of taxation, expert added.
Copyright Business Recorder, 2012
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