LAHORE: The banking industry is anticipating that the upcoming budget would eliminate the Federal Board of Revenue’s ADR-linked tax policy that imposes a higher, punitive tax on income from government securities like treasury bills (T-bills) and Pakistan Investment Bonds (PIBs) for banks having lower than 40pc Advance-to-Deposit Ratio.

The Pakistan Banks Association (PBA) has remained engaged with the finance ministry and the FBR on the ADR-linked taxation as well as other levies on the banks in recent weeks. However, it is not if the government has shown any inclination to do away with the tax.

“The ADR-linked tax amounts to allowing (another authority) other than the banking sector regulator, the State Bank of Pakistan (SBP), dictate what our balance sheets should look like,” PBA chief executive officer (CEO) Muneer Kamal told Dawn in a recent interview.

He was hopeful that the “serious discussions” with the FBR would yield results and lead to a solution.

It is not clear how the banking industry regulator looks at the issue.

However, the State Bank, in its report in 2022, indicated that the ‘banks’ incentive to enhance deposit mobilisation and asset and liabilities management strategy could also have been affected by the ADR-linked tax policy.

Published in Dawn, June 12th, 2024