Decrease tax rate for banks earning income from providing financing to SME’s: SBP

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LAHORE: The State Bank of Pakistan in its recently launched policy for promotion of Small and Medium Enterprises (SMEs) has proposed decrease in tax rate for banks on income earned from providing financing to small businesses.

According to the central bank, small businesses are majorly owned by partners or proprietors who try avoiding inclusion in tax net.

SBP in its policy paper for promotion of SME’s said “Therefore, due to lack of organized and formal structure, banks and DFIs are reluctant to finance these entities,” the SBP said. “Thus, a large part of small & medium businesses remains deprived of bank finance and resultantly fail to grow.”

And Technical Committee of SMEs (under NFIS) is debating to prepare recommendations to settle taxation problems of small and medium enterprises, the SBP said.

The central bank has proposed these recommendations, tax rate reduction on banks’ income derived from SME financing, reduction in sales tax sales tax on small enterprises and medium enterprises and tax holiday on income of qualified startups and women small enterprise borrowers.