The sources said, following proposals were approved by the Prime Minister on December 3, 2019: (i) reduction of threshold for eligible transactions from dollar $200 to $ 100 and rate of compensation at Saudi Riyal 10 for the range of $ 100-200 under the T T charges scheme; and (ii) continuation of new scheme of incentives launched in 2018-19 for banks and exchange companies for calendar year starting January 2020 to achieve the same levels as in calendar year 2019. As per the scheme financial institutions would be incentivized by being allowed one rupee on every incremental dollar over and above the 15 per cent growth during the previous year.
According to the Finance Ministry, home remittances witnessed a growth of 9.7 per cent during July-June 2018-19 compared with the corresponding period of 2017-18 and one of the factors that contributed to this growth was the new incentive scheme that led banks and exchange companies to augment their efforts to contribute towards increase in home remittances.
Following proposals to promote remittances were further discussed in meetings held in Finance Division under the chairmanship of Advisor to the Prime Minister on Finance and Revenue on January 1 and January 15, 2020: (i) to streamline the rebate on remittances, the prevailing rate of TT charges may be enhanced by hundred per cent from SAR 10 to SAR 20 for transactions between $ 100-200; (ii) the existing incentive scheme for marketing of home remittances i.e. Re. 01 against $ 01 of remittances amount beyond 15 per cent growth over last year may be based in tiered growth i.e. Rs 0.50 on five per cent growth, Rs 0.75 on 10 per cent growth and Rs.01 ob 15 per cent growth; and (iii) to leverage home remittance customers and encourage them to use banking channels for receiving their remittances whereby accelerating financial inclusion and inflow of home remittances through formal channels, withholding tax should be exempted on cash withdrawal or on issuance of banking instruments/ transfers from a domestic bank account to the extent of remittance amount received from abroad in that account in a year.
For this purpose, Ministry of Finance has proposed amendment in section 101(A) of Income Tax Ordinance, 2001 which says that the provision of section 231A shall not apply to a Pak rupee account to the extent of foreign remittances credited into such account. This amendment will be effective from July 1, 2020 through Finance Bill. It will provide the banks the required time to put the necessary checks in place.
Loyalty card will be issued to the emigrants wherein various products would be offered to the remitters by the banks, NADRA, FBR and other government organisations like CDNS, USC, Bureau of Emigration & Overseas Employment (BE&OE) and PIA.
The features of the loyalty card are being finalized by the commercial banks through a consultative process and it will come into operation from July 1, 2020 Ministry of OP&HRD will share data of overseas Pakistanis with the banks for targeted marketing. State Bank of Pakistan will take up the issue of data standardization and revision of agreements with the tie ups abroad.
The Ministry of Finance has submitted the following proposals: (i) the prevailing rate of TT charges may be enhanced from SAR 10 to SAR 20 for transactions between $ 100-200 which would cost additional amount of Rs 3 billion to the government; and (ii) the existing incentive scheme for marketing of home remittances i.e. Re 1 against $ 01 remittance amount beyond 15 per cent growth over last year may now be based on tiered growth i.e. Re 0.50 on 5 per cent growth, Re 0.75 on 10 per cent growth and Re 01 on 15 per cent growth. It would cost additional Rs 600 million to the government.
Finance Ministry has also demanded technical supplementary grant of Rs 7 billion from budgetary grants controlled by the Finance Division in favour of demand number 38-other expenditure of Finance Division ID KA-1081 during current financial year may be approved in order to reduce the lag time from 12 to 6 months in reimbursement of TT charges to banks on home remittances.