The federal government is preparing to tax ‘extraordinary profits’ of commercial banks in an effort to improve ‘tax recovery,’ as Pakistan seeks a second $710 million tranche amid talks with the International Monetary Fund (IMF).
Pakistan is operating under a caretaker government, due to an IMF loan program approved in July that helped prevent a sovereign debt default.
Pakistan received the first tranche of $1.2 billion from the IMF under the $3 billion standby arrangement (SBA) in July.
Last week, a group from the International Monetary Fund (IMF) began reviewing Pakistan’s progress for the second loan installment, set to continue until December 15. If the review goes well, the country could receive $710 million in December.
Tomorrow, the federal cabinet is scheduled to discuss a proposal to tax the ‘extraordinary profits’ of commercial banks. The suggestion is to impose a 40 percent tax on banks’ earnings, potentially collecting around Rs50 billion for the Federal Bureau of Revenue (FBR).
Sources claim that banks have made ‘extraordinary profits’ of approximately Rs110 billion in the years 2021 and 2022. Notably, the IMF’s review mission recently met with Pakistani authorities and praised the government for its efforts in economic recovery.
Nathan Porter, IMF Mission Chief, commended the government’s commitment to meeting targets and acknowledged its actions in crucial areas. Caretaker Finance Minister Shamshad Akhtar briefed the IMF on fiscal measures, discussing reforms and strategies to tackle Pakistan’s circular debt issue.
Circular debt is a type of public debt that accumulates in the power sector due to subsidies and unpaid bills.
