FBR contemplates abolishing incentive on overseas loans

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KARACHI: The tax regulator is contemplating to abolish an incentive given to banks on advances through their foreign branches.

According to sources in the Federal Board of Revenue’s Large Taxpayer Unit (LTU), Karachi stated banks had been permitted losses of 1 percent against total advances given annually, reported The News.

But the banks are said to be abusing this incentive on offer by claiming massive advances to their overseas clients via branches outside the country.

The LTU apprised the tax regulator that local banks are asserting losses and making huge provisions in lieu of their overseas branches.

LTU requested the FBR to provide the power to scrutinize such cases and act appropriately.

As per the LTU, the banks weren’t submitting a break-up of advances and provisions under separate sections of foreign and domestic loans.

Consequently, the LTU is forced to accept the data provided as dependable, it said to the tax regulator.

According to projections, loans that banks are extending overseas stand at 20 percent of their entire advances.

The taking back of this incentive would ensure FBR is able to rake in major revenue from banking entities, stated an official at the LTU Karachi.