As authorities struggle to increase tax collection, the state is considering a proposal that could see a levy of 10% tax on profit made on foreign remittances placed in savings accounts.
The proposal comes as the government suspects that the amount sent through remittances could be black money being channelled into the country to evade taxes.
The authorities may also bring gold and silver imports into the tax ambit with its plan of charging 6% withholding tax at the import stage.
The proposals are part of the PML-N government’s elimination of concessionary tax regime plan that will be implemented from the next fiscal year 2016.
Remittances are one of the main sources of foreign earnings and successive governments have shown reluctance to charge taxes on remittances. The fear stems from the government’s reluctance to disturb the flow of dollars critical to balance external books so much so that it is reimbursing the transfer fee to encourage repatriates to send money through banking channels.
For the ongoing fiscal year, the government has estimated receiving $16.7 billion or Rs1.7 trillion on account of workers’ remittances. In the first nine months of this fiscal, the country received $13.3 billion remittances, according to the State Bank of Pakistan.
The FBR is of the view that the profit earned by placing funds in banks cannot be treated as foreign income and should be taxed. All foreign remittances are exempted from all kinds of taxes and are utilised to hide black money, explained a senior FBR official.Source