February 24, 2024

The federal government of Pakistan has recently taken steps to suspend internet-based cryptocurrency services in the country, aiming to curb illegal digital currency transactions in alignment with the guidelines of the Financial Action Task Force (FATF). In a briefing to the Senate Standing Committee on Finance, the State Bank of Pakistan (SBP) and the Ministry of Information Technology highlighted their efforts to ban cryptocurrencies, emphasizing the need for penalties and the formulation of legislation for legal enforcement.

Dr. Aisha Ghaus Pasha, the Minister of State for Finance and Revenue, affirmed that cryptocurrency will never be legalized in Pakistan, citing restrictions imposed by the FATF. Sohail Jawad, Director at the SBP, emphasized the high-risk nature of crypto transactions and stated that permission for cryptocurrency usage will not be granted in Pakistan. He further explained that there are currently over 16,000 types of virtual currency, but the market has shrunk from $2.8 trillion to $1.2 trillion.

In another development, the Senate Standing Committee has decided to hold pre-budget meetings with relevant stakeholders to revitalize the declining economy of the country. Senator Saadia Abbasi proposed these meetings to gather suggestions and concerns from stakeholders for incorporation into the upcoming budget. The committee endorsed this approach, and the meetings are expected to commence next week.

During the meeting, Senator Rana Mehmood Ul Hassan raised the issue of sugar smuggling, but it was disposed of as the concerned member had not attended twice, and sufficient discussions had already taken place on the matter, including the Prime Minister’s involvement.

The Securities and Exchange Commission of Pakistan (SECP) also provided a briefing on proposed amendments to regulations regarding Non-Banking Finance Companies and Notified Entities. The SECP officials denied knowledge of any media reports on the subject and clarified that the SECP’s policy board has the authority to determine the fees chargeable by the organization. They stated that the fee rates were revised after thorough deliberation and analysis, considering the financial position and autonomy of the SECP. The officials clarified that the amendments were not an increase but a reversion to the fee levels of 2019, and industry stakeholders, including MUFAP, were consulted during the process.

The committee also received a briefing from the Federal Board of Revenue (FBR) on the capital value tax (CVT) imposed on local and foreign assets of taxpayers under the Finance Act 2022. It was explained that the CVT is levied on foreign assets exceeding Rs 100 million in value and on motor vehicles exceeding 1300cc/50 kWh battery power. The collection of CVT since the implementation of this law amounted to Rs 3,194 million from foreign assets. Additionally, it was highlighted that the direct tax collection, comprising income tax and CVT, surpassed individual indirect taxes for the first time, accounting for 45% of direct tax collection, while sales tax constituted 42% and customs duty 13%.

Furthermore, the committee discussed the delay in implementing the decision of the Finance Committee by the Ministry of Finance regarding additional Public Sector Development Programme (PSDP) demand for the protection and upgradation of the Pak-China Optical Fiber Cable (OFC) project for cross-border connectivity (Dassi-Danyore alignment). Senator Umer Farooq expressed disappointment over the funding of new projects while neglecting those near completion. The committee criticized the mismanagement and lack of transparency in the allocation and disbursement of funds by the Ministry of IT & T and the Planning Commission. The chairman of the committee reiterated the release of funds amounting to 608 million rupees to close the project and requested a report from the IT ministry on the matter.

The meeting was attended by Senators Farooq Hamid Naek, Saadia Abbasi, Kamil Ali Agha, Umer Farooq, and Dilawar Khan. State Minister for Finance Aisha Ghaus Pasha, Chairman of the FBR, Member Customs of the FBR, and officials from the SECP, as well as the ministries of Finance and Revenue and IT, were also present.

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