Government plans to withdraw Rs329 billion tax exemptions, concessions

KARACHI: The government has planned to withdraw around Rs329 billion worth of tax exemptions and concessions given through various statutory regulatory orders (SROs) within the next three fiscal years, which is likely to boost revenue by one percent of GDP, official sources said on Thursday.
The sources in the Federal Board of Revenue (FBR) said the government planned the withdrawal of Rs91 billion of such exemptions and concessions during the ongoing fiscal year, while another of Rs74 billion in the fiscal year of 2016/17. Exemptions and concessions equivalent to Rs164 billion will be taken back in 2017/18.
“By eliminating the exemptions in the three years, the cost of exemptions and concessions will be brought down to Rs148 billion by 2017/18 from Rs477 billion in 2013/14,” said a tax official.
Tax officials said FBR took the initiative considering the country’s low tax base, which was eroded by a large number of ad-hoc, and often distorted, tax exemptions, issued mostly through SROs.
The government published the tax expenditures first time in the Economic Survey of 2013-14 in order to enhance transparency of the fiscal cost of the exemptions.
A World Bank’s document on Pakistan’s taxation system said the government has approved a three-year plan to phase out SROs-based exemptions either by making them part of the tax laws or levying statutory of reduced (less than statutory) rates.
The gradual withdrawal of SROs is expected to increase government revenue by approximately one percent of GDP in the next three fiscal years.
Notably, the government, in the budget 2015/16, withdrew the powers of FBR to grant tax exemptions and gave them back to the parliament or, under extraordinary circumstances, to the economic coordination committee in order to prevent issuance of discretionary SROs.