KARACHI: The State Bank of Pakistan (SBP) on Friday openly supported the banks and black money deposited with the financial institutions by expressing its displeasure over the authority given by the Parliament to Federal Board of Revenue (FBR) over accessing bank accounts of depositors.
In its Monetary Policy Statement, the SBP feared the significant fall of deposits with banking system over the access authority. It said that the currency to deposit ratio in FY13 has remained unchanged at the previous year’s level of 28.1 percent.
“However, some budget measures such as increase in the withholding tax on cash withdrawals from 0.2 to 0.3 percent and giving authority to the FBR to access bank account information of individuals might deter savers to hold deposits with the banks,” the SBP said and added this, in turn, could adversely affect the currency to deposit ratio, which does not bode well for financial intermediation.
It is worth mentioning that through Finance Act, 2013 the Parliament authorized the FBR to access the depositors account for detection of black money and tax evasion.
The FBR was attempting to get the authority for the last many years but due to prevailing laws regarding bank secrecy and SBP Act prevented such bids. However, latest law overrides all the laws and certain conditions imposed on banks to share information with the FBR.
Despite the passage of the Act the bankers’ lobby is active to force the government to withdraw such provision. Now the State Bank is also supporting them.
It may be mention here that the informal economy in Pakistan is about parallel to the formal one and without identifying those people evading taxes the revenue collection can not be increased.
Ironically, the SBP harshly criticized the FBR for having low revenue collection and held responsible for large fiscal deficit. One must understand that at one hand SBP does not want FBR access authority and on the other it criticizing for low revenue collection.
The fear of SBP is that the deposits would come down clearly shows that the banking system possessed the black money, which the Large Taxpayers Unit (LTU) Karachi in a report already submitted the data to FBR about existence of black money.
Finance Minister Ishaq Dar recently at a meeting with business community categorically rejected the demand of withdrawing the provision or keeping in abeyance. Dar made it clear that the FBR would access the bank accounts but those who were not in the tax net.