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Govt mulls slapping up to 70% Windfall Tax on banking sector’s lofty profits

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  • Sources says govt considering slapping fixed tax rate between 50%- 70%. 
  • Govt determining exact levels of profits extracted through recent currency manipulation by banks.
  • Officials working on proposal studied Windfall Tax imposed by UK, Austria, Italy, Australia and other countries.

ISLAMABAD: The government is considering slapping a Windfall Tax on the profits of the banking sector in the range of 50% to 70% similar to the one used in the West, which imposed the same tax on energy companies, reported The News on Friday.

“Different proposals are under consideration for imposing the Windfall Tax on profits earned by the banking sector. A fixed tax rate from 50% to 70% is expected to be slapped for getting revenues out of the lofty profits earned by the banks,” officials, who spoke on the condition of anonymity, told the publication.

However, sources in the Federal Board of Revenue (FBR) said that the proposal is yet to be approved by the government though Finance Minister Ishaq Dar had hinted in his press briefing on Wednesday that the government would move ahead with the Windfall Tax on the banking sector.

The government is ascertaining the exact levels of windfall profits extracted by the banking sector through recent currency manipulation. The policymakers may slap a tax at a rate whereby there is no threat of choking the banking sector.

The tax officials who are working on this proposal studied the Windfall Tax imposed by the United Kingdom, Austria, Italy, Australia and other countries whereby the energy companies had earned lofty profits in the aftermath of Russia-Ukraine war, so the respective governments had imposed the Windfall Tax to generate revenue. Even the Biden administration in the USA had threatened to impose Windfall Tax.

The recent energy crisis across Europe as a result of COVID-19, poor market decisions and the Ukraine war have pushed energy prices to all-time high. 

Countries across Europe were moving to build up reserves in the face of restricted gas supplies to minimise the effects of a cold winter. At the same time, some governments were even considering country-wide blackouts and energy rationing to ensure that, at the very least, there was enough gas to heat homes.

“The government expects that in case of imposition of 50% to 70% fixed tax rate on lofty bank profits, the government can fetch Rs25 to Rs35 billion revenue generation,” said one official.

On the proposed Flood Levy, the government might grant an exemption on import of basic food items and raw materials of essential or life-saving drugs. 

The levy could be in the range of 1% to 3% on all other imported items. It is estimated that the government can fetch Rs60 billion in the remaining six months of the current fiscal year 2022-23.

Sources said the government will prefer the Flood Levy because it will not become a part of the Federal Divisible Pool (FDP) under the NFC Award for distribution among the provinces, so the collected money will only be used by the federal government.

On the other hand, the FBR seeks to meet the annual tax collection target of Rs7,470 billion for the current fiscal year and has so far collected Rs3,428 billion in the first six months (July-Dec) period. 

Now the tax authorities will have to collect Rs4,042 billion for materialising the desired tax collection target till June 30, 2022.

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In January 2025, RDA inflows reach 9.564 billion USD.

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Remittances under the Roshan Digital Account (RDA) increased from US $9.342 billion at the end of 2024 to US $9.564 billion by the end of January 2025.

The most recent data issued by the State Bank of Pakistan (SBP) revealed that remittance inflows in January totaled US$222 million, compared to US$203 million in December and US$186 million in November 2024.

Millions of Non-Resident Pakistanis (NRPs), including those who own a Non-Resident Pakistan Origin Card (POC), desire to engage in banking, payment, and investing activities in Pakistan using these accounts, which offer cutting-edge banking options.

Nearly 778,697 accounts were registered under the scheme by the end of January 2025, according to the data.

By the end of January, foreign-born Pakistanis had contributed US $59 million to Roshan Equity Investment, US $479 million to Naya Pakistan Certificates, and US $799 to Naya Pakistan Islamic Certificates.

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FBR lowers Karachi’s built-up structure property valuation rates

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A year-by-year breakdown of the depreciation value of residential and commercial built-up properties is included in the updated property valuation rates for Karachi that the FBR has announced.

The notification said that built-up structural values on residential property will be gradually reduced.

A residential home’s built-up structure, which is five to ten years old, will lose five percent of its worth.

In a similar vein, constructions between the ages of 10 and 15 will lose 7.5% of their value, while those between the ages of 15 and 25 would lose 10%. Built-up structures that are more than 25 years old will be valued similarly to an open plot.

Furthermore, age will also be used to lower the valuation of built-up properties, such as apartments and flats.

Structures that are five to ten years old will depreciate by ten percent, while those that are ten to twenty years old will depreciate by twenty percent. A 30% depreciation will be applied to properties that are 20 to 30 years old, while a 50% reduction will be applied to those that are above 30 years old.

In terms of commercial built-up properties, buildings that are 10 to 15 years old will lose 5% of their value, while those that are 15 to 25 years old will lose 8%. The value of properties that are more than 25 years old will drop by 10%.

In contrast, there would be a 15% boost in the value of commercial properties in the Defence Housing Authority (DHA) that face any Khayaban.

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Remittances Increase 25.2% in January 2025: $3.0 Billion Inflow

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Remittances from Pakistani workers totalled US$3.0 billion in January 2025, representing a 25.2% increase from the previous year.

The cumulative remittances for July through January of FY25 were 20.8 billion dollars, up 31.7 percent from 15.8 billion dollars during the same period in FY24.

In January 2025, the United States of America contributed 298.5 million dollars, the United Kingdom contributed 443.6 million dollars, the United Arab Emirates contributed 621.7 million dollars, and Saudi Arabia contributed 728.3 million dollars.

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