close
Tuesday March 19, 2024

Economic Survey: Tax exemptions, concessions cost Rs415.75bln to economy

By Mehtab Haider
May 26, 2017

ISLAMABAD: The Federal Board of Revenue (FBR) has granted Rs415.75 billion exemptions and concessions from duty and taxes to different sectors of the economy during the fiscal year 2016/17 against Rs 394.593 billion in last financial year 2015/16.

According to the Economic Survey 2016/17 released by finance minister Ishaq Dar on Thursday, the amount of tax exemptions increased Rs21.158 billion in the outgoing fiscal year as compared to the last financial year.

The cost of sales tax exemptions stood at Rs250.06 billion in 2016/17 against Rs207.3 billion in 2015/16; income tax, Rs14.005 billion against Rs67.3 billion and the cost of Customs duty exemptions was Rs415.751 billion against Rs119.993 billion in 2015/16.

Surprisingly, the Economic Survey did not mention the revenue losses incurred on account of tax exemptions granted to the independent power producers during 2016/17. In 2015/16, the revenue losses on account of the IPPs stood at Rs50.200 billion against Rs52.030 billion during 2014/15.

Similarly, the survey did not mention any revenue losses on account of exemptions granted on capital gains tax. The revenue losses on account of the same had decreased from Rs2.50 billion in 2015/16 to Rs1.70 billion in 2016/17.

Major revenue loss was caused in the wake of sales tax exemptions, concessions to five major export-oriented sectors, reduction in corporate tax rate and Customs duty concessions and tariff concessions to Chinese imports during 2016/17.

The FBR suffered massive revenue loss of Rs156.9 billion due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. Last year, the cost of exemptions under the Sixth Schedule amounted to Rs128.9 billion. Thereby, the loss on account of (Exemption Schedule) of the Sales Tax Act increased Rs28 billion in 2016/17.

This huge revenue loss revealed that most of the sales tax exemptions are available under a single schedule of the Sales Tax Act.

The revenue loss due to sales tax exemptions available at the import stage under the Sixth Schedule of the Sales Tax Act caused loss of Rs67.6 billion in 2016/17 against Rs51.6 billion in 2015/16. The revenue loss on account of sales tax exemptions available on local supplies under the Sixth Schedule of the Sales Tax Act caused a loss of Rs89.3 billion against Rs77.3 billion.

The revenue loss from SRO 1125 increased to Rs50.4 billion in 2016/17 from Rs43.4 billion in 2015/16, reflecting an increase of Rs7 billion.

Sales tax concessions available to the five leading export-oriented sectors, ie, textile, leather, carpets, surgical and sports goods caused a revenue loss of Rs50.4 billion in 2016/17 against Rs43.4 billion in 2015/16. The concessions under the Fifth Schedule of the Customs Act 1969 cause a revenue loss of Rs62.901 billion in 2016/17 as compared to Rs30.640 billion in 2015/16, according to the Economic Survey. The document also showed that the total revenue loss from the Fifth Schedule of the Sales Tax Act 1990 amounted to Rs26.36 billion during the period under review.

Imports under the Fifth Schedule of the Sales Tax Act 1990 caused a revenue loss of Rs0.56 billion during 2016/17, whereas the local supplies under the Fifth Schedule of the Sales Tax Act 1990 caused a revenue loss of Rs25.8 billion during the period under review.

The cost of sales tax exemptions has been worked out to be Rs250.06 billion for the fiscal year 2016/17.

The cost of income tax exemptions was Rs14.005 billion during 2016/17.

The concession of Customs duty on goods imported from Saarc and ECO countries caused a revenue loss of Rs73 million in 2016/17 against Rs247 million in 2015/16.

The Customs duty exemption on the imports from China under SRO 659(I)/2007 caused a revenue loss of Rs31.618 billion in 2016/17 against Rs30.577 billion in 2015/16, the Economic Survey revealed.