“I want to thank our Overseas Pakistanis for responding so strongly to SBP’s #RoshanDigitalAccounts. 87,833 accounts opened from 97 countries around the world. $500 million sent to Pakistan in just 5 months. Momentum continues to rise with $243 million coming in last 6 weeks alone,” PM Khan tweeted.
I want to thank our Overseas Pakistanis for responding so strongly to SBP’s #RoshanDigitalAccounts. 87,833 accounts opened from 97 countries around the world. $500 million sent to Pakistan in just 5 months. Momentum continues to rise with $243 million coming in last 6 weeks alone
— Imran Khan (@ImranKhanPTI) February 16, 2021
One of the original promises of Imran Khan’s political campaign was to bring overseas Pakistanis’ investment to Pakistan as can be seen in a PTI’s official tweet below made in 2014.
Overseas Pakistanis will make that much investment in Pakistan that Pakistanis will not have to go abroad to find jobs. IK at #AzadiSquare
— PTI (@PTIofficial) August 29, 2014
Thus, ever since coming to power, the premier has been working on this. On 10th September 2020, Imran Khan inaugurated Roshan Digital Accounts (RDA), a joint initiative by the State Bank of Pakistan and the government.
RDA is an incentive for Non-Resident Pakistanis(NRPs) to invest in Pakistan, as higher returns to capital are being offered compared to the banks abroad. Higher returns attract higher capital-inflow as has been seen by the success of RDA.
Commercial banks also see it as an opportunity to join this scheme as it is a positive step towards improving the country’s balance of payments, which could lead to less dependence on foreign borrowing.
By the end of January, over $300 million had been invested in Naya Pakistan Certificates (NPCs), which are comparable to US treasury bonds but offering higher returns(as shown below source: SBP). This means that out of $500 million that Imran Khan mentioned in his tweet, $300 million is coming as an investment and the rest as remittances.
RDA is also an attempt by the government to regulate the remittances that were previously sent via informal means like hundi/hawala. However, due to the ongoing pandemic, traveling has been restricted leading to people incentivized to use formal channels like RDA.
Read More: Remittances exceed $2 billion for 8th consecutive month
Convenience for Non-Resident RDA holders
As a further incentive to the RDA holders, SBP announced on Tuesday, taxation process has been made simpler and hassle-free.
“Based on feedback from the diaspora and recommendations from SBP, the federal government has introduced several amendments in the Income Tax Ordinance 2001 through Tax Laws (Amendment) Ordinance 2021 to make the taxation regime simple for NPRs maintaining RDA, “SBP said.
According to the State Bank of Pakistan, this amendment means that NRPs will not have to file returns on the income they have earned from RDAs.
Further, the tax will not be levied on RDA holding NRPs in cash withdrawals and doing bank transfers as it is on non-filers.
The profit made on debt on RDA deposits is exempted from tax, however, the tax rate on profits on NPCs is 10 percent for both NRPs and resident Pakistanis having declared assets abroad. It is 15pc on dividends received from mutual funds and companies (except independent power producers and tax-exempt companies, which are taxed at 7.5pc and 25pc, respectively).
Read More: IT sector’s remittances grow 38.16% to $648.940 million
According to the new amendment, the profit on shares and mutual funds is also taxed at 15pc, the same rate that is applicable on filers. In addition, at the time of purchase and sale of real estate, a tax of 1 percent of the value of asset will be payable by the NRPs which will be the only tax paid by NRPs against capital gains on real estate investments made through RDAs.
These amendments will act as an incentive for Pakistanis abroad to invest in Pakistan rather than abroad, helping Pakistan and earn higher returns simultaneously.