- Windfall income gains will be taxed under the Finance Act, 2023.
- Agreed to a 40% windfall tax on banking sector profits under IMF terms.
- The move comes ahead of Pakistan-IMF agreement on standby-bailout review
The federal cabinet on Wednesday approved imposition of 40% tax on windfall profits earned by banks on foreign exchange transactions during the years 2021 and 2022.
The imposition of 40% was recommended by the Federal Board of Revenue (FBR) in a cabinet meeting chaired by caretaker Prime Minister Anwar-ul-Haq Kakar.
The new section 99D in the Income Tax Ordinance 2012 – introduced by the Finance Act, 2023 – will impose tax on windfall income gains and profits of banks.
The development came ahead of the agreement between Pakistani officials and International Monetary Fund (IMF) staff on the first review of the second tranche of the staff-level agreement under the $3 billion loan programme.
The IMF mission and the Pakistani economic team, led by Nathan Porter, completed discussions on all areas.
The Pakistani delegation was led by acting Finance Minister Shamshad Akhtar and included State Bank of Pakistan (SBP) Governor Jamil Ahmed, FBR Chairman Malik Amjad Zubair Tiwan and officials from the Finance and Energy ministries.
Sources said a windfall tax of up to Rs 55 billion will be imposed for financial years 2021 and 2022. Tax on profits earned by banks will be collected in the month of December.
According to Finance Ministry sources, there is no need for any amendment in the Finance Bill to impose windfall tax on the banking sector.
“However, the windfall tax will require approval from the federal cabinet,” he said.
Besides, the IMF delegation and economic team are likely to draft the Memorandum of Economic and Financial Policies (MEFP) today, sources said.
Sources said that the parties have also agreed not to increase the interest rate further.