FBR identifies individuals, companies to remove tax exemptions

KARACHI: The Federal Board of Revenue (FBR) will withdraw income tax exemptions granted to individuals and companies to increase revenues, sources said on Wednesday.

The sources said the FBR has started identifying persons and companies availing the tax exemptions/concessions granted by names under the Income Tax Ordinance 2001. Withdrawal of a few tax exemptions has been recommended in the proposed tax amendment law, which would be introduced in coming days.

In the proposed tax amendment laws it has been recommended to withdraw exemption on income of Astro Plastics (Pvt) Limited and Novatex Limited. These companies have been granted tax concessions under clause 126G, part I, Second Schedule of the Income Tax Ordinance, 2001.

The sources said income of Astro Plastics (Pvt) Limited has been exempted on its project Biaxially Oriented Polyethylene Terephthalate and income of Novatex Limited has been exempted on its project Biaxially Oriented Polyethylene Terephthalate.

Another proposal has been given to withdraw exemption available to Sheikh Sultan Trust Karachi under clause 57, Part I, Second Schedule of Income Tax Ordinance, 2001. Further, the tax authorities have recommended to withdraw exemption on profit on debt by Hub Power Company Limited as such exemption is no more required.

The sources said another proposal was under consideration to withdraw the reduced rate of income tax available to Pakistan Cricket Board (PCB). The reduced rate is available to PCB under clause 3B of part 2, Second Schedule of Income Tax Ordinance 2001. The board is availing the reduced rate of income tax since 2016. Under this clause the income of PCB derived from sources outside Pakistan shall be taxed at a rate of four percent of the gross receipts from such sources.

The Second Schedule of the Income Tax Ordinance, 2001 mainly related to exemptions and concessions allowed to individuals, companies and groups of persons.

The sources said the FBR is working to reduce the number of exemptions and concessions granted under this schedule as such facilities had created inequity in the tax system.

The FBR may present its proposals for withdrawal of exemptions and concessions in the upcoming federal budget 2021/22 for approval from the parliament. Three major bills including reforms in corporate income tax, state-owned enterprises and autonomy of the State Bank of Pakistan were to be presented before the parliament.

The sources said about 77 proposals are under consideration for withdrawal of tax exemption available under the Income Tax Ordinance 2001. They said most of the tax exemptions were already expired or exemptions available would be shifted to tax credit.