10% foreign remittance tax in Pakistan expected for FY 2016
ISLAMABAD: As corridors of power struggles to enhance tax collection, the state is taking a proposal that could see levy of 10% tax on profit made on foreign remittances put in savings accounts.
The offer appears as the government doubts that the amount sent through remittances could be black money being channelled into the country to dodge taxes.
The authoritative may also bring gold and silver imports into the tax net with its intention of charging 6% withholding tax at the import stage.
These proposals are part of the PML-N government’s doing away with the concessionary tax regime plan that will be implemented from the next fiscal year 2016.
In the light of $6.7 billion International Monetary Fund bailout program, the government is bound to phase out all the concessionary Statutory Regulatory Orders (SROs) within three years.
In the first section, it has already taken out Rs103 billion worth of SROs. The next phase will be implemented from July this year and the Federal Board of Revenue (FBR) has worked out plans to take out more SROs worth more than Rs120 billion.
Currently, the turnover earned by depositing remittances proceeds in local banks is off the hook from all taxes – including the 10% withholding tax that is charged on income-generating bank accounts. The FBR has determined the proposal to withdraw this exemption beside almost a dozen more from next fiscal year, as said the sources from tax department.
For the ongoing fiscal year, the government has reckoned receiving $16.7 billion on account of workers’ remittances. In the first nine months of this fiscal, the country received $13.3 billion remittances, as stated by the State Bank of Pakistan.
According to a former central banker, approximately 10% to 15% of the total remittances are not authentic cases and the platform is used as means to legalise ‘ill-gotten’ incomes. He was of the view that these massive amounts are subsequently invested in the stock market and the real estate department.
Expressing their reservations, the authorities said that it will hinder efforts to curb the increasing money laundering issue. Officials said politicians and industrialists have been using these platforms to transfer their ill-gotten money to Dubai and then use the remittances channel to bring it back.
