Investment In Prize Bonds Increased In Last Five Years
Investment In Prize Bonds Increased In Last Five Years: Investment in prize bonds more than doubled to Rs.814 billion during the past 5 years, the SBP data showed, as tax-saving investors preferred the avenue alternative to banking deposits.
The State Bank of Pakistan’s (SBP) latest data showed that investment in prize bonds stood at Rs.814 billion as of March compared with Rs.388 billion in June 2013. Investment in prize bonds sharply rose to Rs.518 billion in June 2015 after the government slapped taxes on all the banking transactions, especially on non-filers to increase documentation of the economy.
A senior financial analyst said investment in prize bonds sharply increased after the past government enhanced withholding tax scope to broaden tax base.
In June 2015, the withholding tax rate on cash withdrawal of Rs.50,000/day by non-filers of tax returns increased to 0.6 percent, while it was kept unchanged at 0.3 percent for filers. The government brought down withholding tax to 0.4 percent from 0.6 percent on non-filers following strong protest by small business men, retailers and wholesalers.
The SBP’s statistical bulletin showed that investment in prize bonds were around Rs.130 billion during the first two years (2013 to 2015) of the previous government, which appeared to be a normal trend.
“But since June 2015, parking of funds in bearer certificates increased sharply, which showed that dealers, traders, small business men and other retailers shifted their focus to trade in government securities and prize bonds,” an analyst said. Analysts said the act of the government to document the economy was a step in the right direction.
“It will take a long time; although it aroused interest in prize bonds, especially the big ticket prize bonds,” an analyst said. The central bank’s data showed that investment in prize bond of Rs.40,000 increased to Rs.229 billion from Rs.99 billion during the last five years.
Prize bond of Rs.25,000 attracted Rs.141 billion as compared to Rs.40 billion.
Prize bond with face value of Rs.15,000 saw an increase in investment to Rs.145 billion from Rs.70 billion.
Prize bond of Rs.7,500 received inflows of Rs.76 billion as compared to Rs.48 billion and prize bond of Rs.1,500 witnessed an increase in investment to Rs.92 billion from Rs.56 billion during the period under review.
Analysts said growth of investment in prize bonds was interplay of tightening measures of the government to increase documentation as well as rise in per capita income and economic growth.
An analyst said banking deposits would have surpassed Rs.12 trillion if taxes were not introduced.
“Usually, middle class community buys prize bonds to get rich overnight, but now it has appeared to be safe haven for the people thanks to the policies of the previous government which introduced several measures to arrest ever-increasing black economy,” an analyst said.
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