Plastic Money to become Expensive in Pakistan

 
 
 
plastic money to become expensive in Pakistan

Plastic money represents the hard plastic cards used in daily life in place of actual banknotes. They come in several forms, such as debit cards, credit cards, store cards and pre-paid cash cards. Plastic cards have become a necessity for modern customers and clients for banking purposes. Debit and credit cards have largely replaced cheques as alternatives to cash. Both the cards are reasonably secured compared to cash and are widely accepted.

The main feature of plastic money that made it popular globally is its feasibility. Banks have been giving free debit cards to every customer when they open their account. These cards offer multiple benefits to the customers for shopping in the malls and eating food in restaurants, and different discounts and offers they get from big brands.

According to the State Bank of Pakistan (SBP), credit card users stand at around 2.1 million, ATM cards are 9.07 million, and debit cards stand at 29.1 million, more than 50% of total card users. The rest use social welfare cards such as Benazir Income Support Programme cards. These users are estimated to be at 7.7 million (Daily Times).

However, Pakistan has struggled with Tax Collections for decades as most transactions are not documented and are done in cash without receipts. The government can easily trace financial transactions through cards by making plastic money mandatory. Developing a culture of plastic money will make it easy for the government to trace suspected black money sources.

 Currently, Pakistan is facing the daunting task of managing a stuttering economy with huge deficits. The country’s current account deficit is projected at around 4% of GDP for FY22, while foreign reserves dropped to $9.7 billion (Express Tribune). Aimed at saving the fast depleting foreign exchange reserves, the government plans to impose a 1% tax on all credit and debit card transactions conducted in the country to buy goods abroad or during international travel. The rate could be 2% for the non-filers of income tax returns. However, this time, the government wants to impose a tax on all those online transactions resulting in the outward flow of money from Pakistan.

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IMARAT Institute of Policy Studies

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