Pakistan's tax authority is lobbying the finance ministry to announce the imposition of excise duty of 7.5 per cent on financial services in the 2006-07 budget to be presented to the National Assembly on 5 June.

The Central Board of Revenues' (CBR's) budget proposal is to impose the duty on fees and commissions charged by commercial banks for services provided in several areas, including letter of credit (L/C) issuance.

Fees and commissions

Currently the CBR charges no excise duty on financial services, but it does collect duty from services such as telecommunications, advertisements on cable television, closed-circuit TV, domestic air travel and train travel.

The main banking services on which fees and commissions would apply if the CBR's financial services proposals find their way into the budget are L/C issuance, guarantees, broking and foreign currency dealings.

The CBR's proposals also include the imposition of excise duty on service charges on leasing services.

Opposition

The CBR proposed imposing excise duty on financial services last year, but dropped that proposal because of opposition from the State Bank and several cabinet members.

If the CBR's financial services proposals are included in this year's budget, the government is expected to generate additional annual revenue of around US$67 million.

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