Pakistan Reviews Plan to Allow Higher Foreign Currency Inflows Amid Tax Reform Push

ISLAMABAD: The government is reviewing a proposal that could allow individuals to bring unlimited foreign currency into Pakistan, subject to central bank verification of the money’s source.

Officials are also considering raising or removing the current Rs5 million “no questions asked” limit under Section 111(4) of the Income Tax Ordinance.

Tax Law Changes Under Consideration

At present, the Federal Board of Revenue (FBR) does not question foreign remittances below Rs5 million if they arrive through banking channels and include a bank certification.

However, the government is now weighing amendments to tighten oversight while expanding inflow flexibility. Under the proposal, the State Bank of Pakistan would certify the legitimacy of both sender and recipient.

Importantly, no final decision has been made yet. Sources say discussions remain at an advanced stage.

Advisory Firms Project Billions in Potential Inflows

According to advisory firm Tola Associates, Pakistan could attract up to $20 billion annually if the threshold is relaxed or removed.

Additionally, the firm suggested a tax-free incentive of Rs10 per dollar on remittances through banking channels. It argued this could boost formal inflows by $4–5 billion per year.

Meanwhile, it also proposed that easing outbound remittance limits could help conserve $1–2 billion in foreign exchange.

IMF, Policy History, and Currency Debate

Previously, the government reduced the exemption limit from Rs10 million to Rs5 million to prevent unexplained wealth from entering the formal system.

Earlier, the PDM government also proposed a $100,000 threshold, but it withdrew the plan due to IMF concerns.

At current exchange rates, Rs5 million equals roughly $17,900, while $100,000 equals about Rs28 million.

Broader Economic Reform Proposals

Furthermore, the Pakistan Business Council (PBC) has submitted wider tax reform recommendations.

It has proposed either abolishing or reducing the capital value tax on foreign assets. It also argued that the combined tax burden on certain investments can exceed 60%.

In addition, the PBC called for the removal of the super tax, saying it discourages reinvestment and export growth. It also recommended revising surcharge rates on high-income earners.

Economic Impact and Policy Outlook

Analysts believe the proposals aim to improve foreign exchange stability and attract overseas capital.

If implemented, policymakers expect stronger remittance inflows, improved liquidity, and potential currency stabilization. However, authorities are still evaluating risks related to money laundering and revenue leakage.