Banks told to deposit windfall tax by Nov 30

In what appears to be a major move, the Federal Board of Revenue (FBR) on Wednesday notified the imposition of a 40 per cent tax on windfall income, profit and gains earned by banks from foreign exchange transactions over the past two years. Banks are required to deposit the tax amount with the FBR by Nov 30. However, the deadline may be extended to Dec 15, if a valid justification is provided to the Commissioner of Income Tax. The one-time tax is projected to generate a revenue of approximately Rs42 billion. In October last year, the then Finance Minister Ishaq Dar pledged to take action against banks accusing them of manipulating exchange rates and making substantial profits. However, no visible action was taken against any bank during his tenure. The only information that surfaced was a briefing to the Senate’s Standing Committee on Finance, where the State Bank of Pakistan governor disclosed that eight banks had received notices for their alleged involvement in manipulating exchange rates. However, no further details or outcomes were made public following the issuance of these notices. Caretaker Prime Minister Anwaarul Haq has given the green light to the decision to tax the windfall profits of banks. This is a step that the previous coalition government had contemplated but was unable to put into action.