Proposed tax on forex exchange income to reduce banks’ profits up to 11%

Banks in Pakistan could see their profits reduced by 4-11 percent if government goes ahead with its plans to impose 10-30 percent tax on foreign exchange income.

According to sources, if the government imposes an additional 10-30 percent tax on such income, it could collect an additional Rs. 12-36 billion.

Finance Minister Ishaq Dar in a recent press conference indicated that government was planning to impose a tax on banks’ foreign exchange income to increase tax revenues.

The government and the State Bank of Pakistan (SBP) have recently been very critical of the excessive gains made by banks due to currency volatility. Recently, Jameel Ahmed, the governor of Central Bank, informed National Standing Committee on Finance and Revenue that investigations against leading banks have been launched regarding their role in exchange rate manipulation.

SBP has not yet penalized banks for excessive gains, however, a higher tax on the foreign exchange income of the bank is under consideration.