PM forms high-level committee to review tax on ADR and bank profits

The government has established a high-level committee to review fiscal measures related to the banking sector’s Advance-to-Deposit Ratio (ADR) and explore alternative schemes to tax bank profits earned from investment in government securities.

Prime Minister Shehbaz Sharif formed the committee under the chairmanship of Deputy Prime Minister Ishaq Dar, tasked with resolving the issue of the 15% additional income tax imposed on banks with an ADR below 50%. 

The tax had been upheld by Dar in June this year, resisting efforts to quietly waive it in the Finance Act.

The committee includes the finance minister, law minister, minister of state for finance, attorney general of Pakistan, finance secretary, Federal Board of Revenue (FBR) chairman, State Bank of Pakistan (SBP) governor, and Asma Hamid.

According to its terms of reference (ToRs), the committee will review the existing legal framework related to the ADR, engage with stakeholders in the banking sector, and propose a consensus-based solution. 

The panel will also deliberate on alternative fiscal schemes to tax profits earned by banks through investment in government securities.

The committee has been directed to finalize its recommendations and present a report to the prime minister by the end of December. 

Ishaq Dar has been authorized to suggest legal and regulatory amendments to address the issue.

The government views this initiative as critical to ensuring sustainable revenue realization while addressing the concerns of the banking sector.