The proposed Deposit Protection Corporation would be exempted from payment of Super Tax applicable at the rate of 4 percent for banking companies and at a rate of 3 percent for persons other than banking companies under the Deposit Protection Corporation (DPC) Bill 2016. It is learnt that the section 31 of the DPC Bill 2016 has proposed a provision relating to the exemption from taxes.
According to the proposed section, 'Notwithstanding anything contained in the Wealth Tax Act, 1963 (XV of 1963), the Income Tax Ordinance, 2001 (XLIX of 2001). The Stamp Act 1899 (II of 1899) or any other law for the time being in force relating to wealth tax, income tax, super tax or any other tax, the Corporation shall not be liable to pay any wealth tax, income tax or super tax', it added.
Deposit Protection Corporation (DPC) Bill 2016 has been submitted in the Senate for establishing the Deposit Protection Corporation by introducing deposit insurance scheme which is an integral safety-net to ensure the soundness of the banking system and protect small depositors of a bank in case of its failure.
Under the proposed Act, Deputy Governor State Bank of Pakistan would head the proposed Deposit Protection Corporation (DPC). The purpose of the subject draft Act is to establish the Deposit Protection Corporation (DPC) for instituting an explicit deposit insurance scheme in Pakistan. Under the proposed Act, the corporation shall guarantee the full payment of funds held in depositor's accounts with a member institution, regardless of the number and size of the deposits, up to an amount prescribed by the Corporation from time to time.
The above amount shall be inclusive of any interest accrued or returned as at the date of the notification of the State Bank under terms and procedures for reimbursement of protected deposits. Details of the proposed law revealed that the banking system in Pakistan has become increasingly private sector-owned through the privatisation of the once dominant state-owned banks and the entry of new banks. Consequently, the share of public sector banks has dropped from 92 percent in 1990 to around 19 percent in March 2015.
However, the legal framework originally promulgated for nationalised banks has not kept pace with these developments. In order to protect small depositors, it is proposed to introduce an explicit depositor insurance scheme through DPC which will compensate depositors up to a prescribed limited amount in case of a bank's failure. The DPC will be a fully owned subsidiary of the State Rank which has the statutory responsibility to ensure the soundness of the banking system. This arrangement will yield maximum synergy and cost-saving due to close co-ordination of the DPC with the State Bank's supervisory functions and resources. This Bill is designed to achieve the aforesaid purpose.
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