Friday May 20, 2022

Mini budget comes with two ordinances

Two ordinances were promulgated on Thursday to comply with the conditions of the International Monetary Fund (IMF).

By Our Correspondent
March 26, 2021

ISLAMABAD: Two ordinances were promulgated on Thursday to comply with the conditions of the International Monetary Fund (IMF).

The first ordinance is about withdrawal of corporate tax exemptions of Rs140 billion, while the second ordinance is about giving autonomy to National Electric Power Regulatory Authority (Nepra) regarding increase in power tariff. After the ordinance, the government would be bound to immediately notify the raise in power tariff recommended by Nepra. If the notification was not issued within two weeks, then the Nepra recommendation will come into practice automatically.

An additional burden of more than Rs700 billion will be put on the power consumers. According sources, the promulgation of the ordinance was one of the prior actions for the approval of the $500 million IMF tranche. Earlier, Islamabad held out an assurance to the

IMF to put in place the legislation in Parliament before March 20 with an agreement that it will come into effect from July 1, 2021. The bill was submitted in the National Assembly with a delay of two days when the Lower House had already been prorogued. The fund, however, was not willing to accept this and asked Islamabad to promulgate the proposed measures through a presidential ordinance.

With the introduction of the ordinance, the decisions will come into effect immediately, which were earlier agreed to be effective from July 1, 2021. The revenue implication as per ordinance will be for three months and eight days of the tax year 2021.

The corporate income tax reforms are in line with recommendations of the IMF, which estimates it will generate revenue of Rs140 billion annually. Under the proposed ordinance, the government will withdraw around 36 tax exemptions and streamline other corporate tax exemptions. There will be no blanket exemption for the non-profit organisations (NPOs). The tax credit will be given to NPOs based on compliance level.

The government introduced over 75 amendments to tax laws, which will be applicable immediately. People hiding their income will face fine worth 50 percent of their due tax. Shop owners will be fined Rs5,000 for not displaying tax numbers. There will be Rs5,000 fine for those not filing tax returns or wealth statements, according to the ordinance.

Businesses will have to display their National Taxation Numbers (NTN) or Business Cards, or face fines. The government has withdrawn tax exemption for fresh graduates and investment companies. It has imposed income tax on textbook boards and private power companies too. Sources said the film industry will also face taxation.

A new schedule has been introduced in the Income Tax Ordinance under which 62 NPOs will get tax exemption. The NPOs with tax exemption include Shaukat Khanum Memorial Trust, Sharif Trust, Alamgir Welfare Trust, Citizen Foundation, Fatimid Foundation Karachi, Al-Shifa Trust, Mumtaz Bakhtawar Memorial Trust, Red Crescent Society, Al-Shifa Eye Trust Hospital, Akhuwat, Pakistan Aid Foundation, Al-Khidmat Foundation, Prime Minister Flood Relief Fund 2010, and Chief Ministers Flood Relief Fund 2010 etc.

The houses to be built under the prime minister’s scheme by June 2024 will also get tax exemption. The tax exemption of IPPs, Real Estate Investment Trust, Mudarba companies, Sukuk bonds income and profit, and manufacturing sector.

Tax exemptions are replaced with tax credit for coal mining projects and IT exports. There will be no turnover tax for the IT sector anymore. The availing of tax credit is linked with mandatory filing of income tax and sales tax returns as well as submission of withholding statements.

There will be a tax credit for greenfield industrial undertakings, exemption of turnover tax on supply chain of locally manufactured mobile phones. No exemption for IPP projects from July 1, 2021. There is also a change in penalties for non-compliant taxpayers.