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To address IMF concerns: Govt agrees to abolish Rs150 bn corporate income tax exemptions

the government has agreed to abolish the Corporate Income Tax (CIT) exemptions, either through a presidential ordinance or submission of bill before the parliament in order to satisfy the IMF.

By Mehtab Haider
February 18, 2021

ISLAMABAD: Ruling out the possibility of changes in the General Sales Tax and Federal Excise Duty till the announcement of the upcoming budget, the government has agreed to abolish the Corporate Income Tax (CIT) exemptions, either through a presidential ordinance or submission of bill before the parliament in order to satisfy the IMF.

“We are exploring all available options including promulgation of a Presidential Ordinance or laying a bill before the parliament for getting approval to abolish the Corporate Income Tax exemption to fetch Rs150 billion to Rs200 billion but nothing is so far decided,” top official sources confirmed to The News here on Wednesday.

The government will have to move ahead before the upcoming budget 2021-22 to satisfy the IMF’s executive board. It is likely that the government may table a separate bill before the parliament to demonstrate that it is serious to withdraw the CIT exemptions. The FBR is of the view that for practical purposes, it would not make any impact, so the easy way is to withdraw the CIT exemption through the Finance Bill for 2021-22 on eve of budget. But the IMF is not prepared because it will make their task tougher to convince their executive board to revive the stalled Fund program for Pakistan. It was a wish-list of the Pakistani negotiators to convince the IMF for slashing down the FBR’s annual tax collection target from Rs4,963 billion to Rs4,550 billion. The Finance Ministry had asked the Fund staff to slash down the target to Rs4,600-4,700 billion. Although, it is not yet decided but Islamabad’s high-ups are making last ditch efforts to convince the IMF before sending its review report before the Fund’s Executive Board.

When contacted, the IMF’s Resident Chief in Pakistan, Teresa Daban Sanchez, on Wednesday evening replied, “The authorities are committed to a fiscal strategy anchored by the sustainable primary deficit approved in the FY2021 budget. Remember that primary deficit is key parameter under the EFF supported program.”

The FBR has finalized the withdrawal of corporate sector income tax exemptions of up to Rs100-150 billion from the Income Tax Ordinance 2001. The working done by the FBR shows that the corporate sector enjoys income tax exemptions up to Rs150-200 billion and it now remains to be seen how many exemptions would be abolished following approval of the policymakers, they added.