The corporate tax rate for banks is 35 per cent or 6pc higher than 29pc for non-banking businesses in Pakistan. Besides, capital gains and dividend income streams for banks are also taxed at the same rate as opposed to the reduced rates for other companies. On top of that, banks are required to pay `super tax` at the rate of 4pc. The tax was levied in 2015 on banking and non-banking companies to fund the rehabilitation of the Internally Displaced People (IDPs) in the ex-Fata (Federally Administered Tribal Areas) region of Khyber Pakhtunkhwa a year after the launch of the military operation against militants.

Initially, it was imposed for one year, but the government kept extending it every year until it was phased out for the non-banking companies in 2019 but extended for an indefinite period for banks.

The tax story of the banking industry doesn`t end here. Banks are charged additional income tax on their profit from their investment in the short to long-term government debt such as T-bills and PIBs to meet the needs of the resource-starved government. `Different rates apply depending on a particular bank`s ADR (Advances to Deposit Ratio),` the chief financial officer (CFO) of a big bank told Dawn on condition of anonymity.

(Abstract from Dawn’s story published in Nov 01 issue and are worthwhile to read – Courtesy – Dawn).