KARACHI, July 20: How the budget 2002-03 is going to impact on consumers banking is an important issue because people falling in the middle income group make up a significant part of the retail clients of the banks. Let us see how the bankers see it.

Says country corporate officer of Citibank in Pakistan and the chairman of Pakistan Banks Association Zubyr Soomro: “The major contribution of this budget from the consumers’ perspective is the introduction of the Universal Self-Assessment scheme under which people will be responsible for their own tax assessment.”

“Similarly for major corporates and other substantial tax payers the setting up of large tax payers unit should ensure senior and thus quality attention and recourse and therefore build confidence,” Soomro says in a statement e-mailed to Dawn.

While terming this emphasis on improving tax administration as an important step forward he says it can provide significant boost to investment both by individuals and corporates—both domestic and foreign.

He says that the increase in the entitlement of assessees to an allowance in respect of mark-up paid under a housing finance loan should have an impact on consumer banking.

In the budget 2002-03 this entitlement has been raised from Rs50,000 to Rs100,000 and in addition the loan limit of Rs600,000 has been abolished. “This should lead to more house financing and financing for construction and consequently contribute to raising demand across a wide range of industries,” says Soomro.

He also appreciates the removal of the tax to be deducted on out-station cheques, demand drafts, pay orders and telegraphic transfers. “This tax effectively discouraged the use of banking channels for transfer of funds,” he remarks.

The reduced limit for exempt income of investment in national saving schemes from Rs300,000 to Rs150,000 aims at drawing funds back into the banking system. “While the exemption under the NSS is lost for this amount the individuals will be exposed to the benefits of full consumer banking products—both on the deposit and lending sides,” he argues.

On top of all “the reduction in income tax rates for banks from 50 to 47 per cent effective January 2003...will continue to encourage investment in banking and provision of better services to the consumers.”

President of National Bank Syed Ali Raza adds another plus to the measures cited by Zubyr Soomro as consumer banking friendly.

“The abolishing of withholding tax on domestic remittances and loan agreement documents; reduction of tax on brokerage commission as well as abolishing of withholding tax on indent commission remitted to Pakistan will result in improved usage of banking channels,” he said.

He says that with the elimination of withholding tax at source on remittances “the banks should be able to tap the business of Pakistan’s informal cash economy.”

Similarly the reduction in tax rates on brokerage and commission “will result in more activity in the money market.”

“The exemption of tax on bonus shares should give impetus to the stock exchange,” he says adding that the reduction in duties on consumer products will encourage competition in the local market. “Banks should be able to play their role in consumer credit in this market.”

“As far as the salaried class is concerned,” says Ali Raza “it will get the benefit of claiming a certain amount of interest paid on housing loans as a tax expense. But he points out that “the withdrawal of exemptions previously available to salaried people on perks and benefits will have an impact on their disposable income.”

“Overall the budget is a bold step in steering the economy through post September 11 scenario...and its impact on consumer banking should not be averse.”

LEASING: Executives of leasing companies point towards some measures announced in the budget 2002-03 that will increase availability of leasing facility for cars of 1300cc and more besides creating more competition between the leasing companies that would result in cheaper leases for the common man.