The exchange companies have urged the government to exempt them from 0.3 percent withholding tax on cash withdrawals from banks, it is learnt. Sources said that President Asif Ali Zardari, who has been holding meetings with banks and exchange companies to facilitate remittances, directed the State Bank of Pakistan to look into the grievances of the exchange companies and suggest workable proposals for their demands.
At a meeting recently held in the Ministry of Finance, the Exchange Companies Association of Pakistan (ECAP) had requested for exemption from 0.3 percent withholding tax on cash withdrawal by ECs from banks, and sought permission to convert their airport booths into exchanges.
The exchange companies have asked the government to allow them to handle inland remittances transactions through which a person selling foreign exchange in one city may receive cash in another city. The companies have also proposed that to curb smuggling of foreign currency by individuals, the central bank/customs of UAE may be approached to check incoming/outgoing individuals carrying foreign currency and authorities of both countries share data with each other.
An official said that the exchange companies also complained that they are not being provided level playing field, and demanded payment of Saudi riyal 25 to the ECs on every home remittance transaction, as is being given to commercial banks. The official said the demand of the exchange companies was opposed by the Ministry of Finance on the ground that Rs 2.357 billion allocated for the purpose during current fiscal year had been released to SBP on July, 27, 2011. However, the Governor of SBP requested an additional Rs 2.10 billion to clear the backlog of 2010-11. If the exchange companies are allowed to join this scheme, as proposed by SBP, it will increase the financial impact of the scheme.
The Ministry stated that Pakistanis residing abroad had been sending their remittances to their families through illegal channels like Hundi etc, being cheaper than sending the same through banks. To curb this trend and to promote legal channels for home remittances, the government had initiated paying Telegraphic Transfer (TT) charges on home remittances sent through banking channels in 1985. The banks in Pakistan enter into remittance specific arrangements with overseas entities for mobilisation of remittance under the scheme for telegraphic transfer reimbursement charges to banks. The charges are paid to banks at the uniform rate of 25 Saudi riyal per transaction of $100 or above.
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