ISLAMABAD: The tax exemptions and concessions being offered to various sectors, groups and investors cost the national exchequer Rs477.1 billion during 2013-14 against Rs239.5 billion in 2012-13, reflecting an extraordinary increase of Rs237.6 billion. The Economic Survey (2013-14) disclosed that tax expenditure for 2013-2014 has been worked out at Rs477.1 billion.
The cost of tax exemptions in the head of sales tax, income tax and customs duty has increased by Rs237.6 billion in 2013-14 as compared with 2012-13. Six sales tax statutory regulatory orders caused a cumulative loss of Rs230 billion in 2013-14 which is higher than the total income tax expenditure of Rs96.634 billion. The cost of sales tax exemptions totalled at Rs249 billion in 2013-2014 against Rs37.436 billion in 2012-13, income tax, Rs96.6 billion against Rs82.393 billion and cost of custom duty exemptions was Rs131.451 billion in 2013-2014 against Rs119.706 billion during the corresponding period of last fiscal.
The sales tax exemption SROs resulted in major increase in revenue loss to the national exchequer during 2013-14. The cost of tax exemptions has been considerably increased due to the sales tax exemption SROs during 2013-14. The Economic Survey disclosed the FBR has suffered massive revenue loss of Rs19 billion due to sales tax exemptions and zero-rating available through Export Facilitation Schemes during 2013-14. The sales tax statutory regulatory orders (SROs) caused huge revenue loss to the tune of Rs230 billion to the national kitty during this period. Sales tax concessions available to the five leading export oriented sectors ie textile, leather, carpets, surgical and sports goods caused revenue loss of Rs65 billion in 2013-14. The exemption of customs duty on the imports from China under different notifications caused accumulative revenue loss of Rs21.464 billion during 2013-14. The general and conditional exemption of customs duty (non-survey) caused huge revenue loss of Rs32.515 billion. The income tax exemption granted to the Independent Power Producers caused revenue loss Rs52.030 billion in 2013-14 against Rs48.600 billion in 2012-13, reflecting an increase of Rs3.43 billion.
The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account. However, importers, investors and local manufactures have availed concessions and exemption of Rs131.451 billion under different notifications of customs duty and free trade agreements during 2013-2014 against Rs119.706 billion in 2012-13.
On the direct taxes side, the revenue loss on account of capital gains has decreased from Rs15 billion in 2012-13 to Rs5 billion in 2013-14. The revenue loss on account of capital gains has been decreased by Rs10 billion in 2013-14 when compared with 2012-13.
The cost of sales tax exemptions has been worked out and is estimated to be Rs249 billion for the fiscal year 2013-14. Followings are the main exemptions in sales tax and their cost of exemptions during 2013-2014: SRO 727(I)/2011 (plant and machinery) resulted in revenue loss of Rs 14 billion. SRO.1125(I)/2011 relating to concessionary rate of sales tax on raw materials, intermediary inputs and finished goods relating to textiles, carpets, leather, sports and surgical sectors, caused huge revenue loss of Rs 65 billion to the national exchequer. SRO 549(I)/2008 (zero percent sales tax on specified goods) resulted in revenue loss of Rs94 billion; SRO 575(I)2006 (machinery, equipment, apparatus and items of capital goods) caused revenue loss of Rs 30 billion. SRO 551(I)/2008 (exemption from sales tax on import and supply of certain items) caused loss of Rs 26 billion to the kitty in 2013-14. SRO 69(I)2006 (levy of sales tax at the rate of 14 percent on rapeseed) caused loss of Rs 1 billion.
Export Facilitation Schemes caused accumulative revenue loss of Rs19 billion to the national kitty in 2013-14. SRO 450(I)/2011 (DTRE&MB) resulted in revenue loss of Rs14 billion; SRO 326(I)2008 (EOU) loss Rs1 billion and SRO.492(I)2009 (temporary scheme & same state goods) caused huge revenue loss of Rs4 billion. The cost of income tax exemptions has been increased to Rs96.634 billion in 2013-2014 against Rs82.393 billion in 2012-13.
Major income tax exemptions included exemptions related to pensions/gratuity; income from funds, board of education, universities and computer training institutions; donations and contributions to charitable organisations; Independent Power Producers; income from certain trust, welfare and charitable institutions non-profit organizations; profits on debt/interest from government securities and certain foreign currency accounts/books profit on debt; export of Information Technology; capital gains and other sector and enterprise specific exemption.
The government has also suffered a loss Rs52.030 billion in 2013-2014 against Rs48.600 billion in 2012-13 due to income tax exemption available to Independent Power Producers. The data showed that the IPPs have availed income tax exemption to the tune of over Rs52 billion during 2013-14 against Rs48.600 billion in 2012-13.
The income tax exemption to pensioners cost Rs 1 billion in 2013-2014 against Rs 0.800 billion in 2012-13; income from funds, board of education, universities and computer training institutions Rs11.100 billion against Rs9.100 billion; donations and contributions to charitable organisations Rs2.500 billion against Rs1.300 billion; income from certain trusts, welfare and charitable institutions and non-profit organisations Rs 1.910 billion against Rs 0.600 billion; profits on debt/interest from government securities and certain foreign currency accounts/books/profits on debt Rs 4.100 billion against Rs 2 billion; export of Information Technology Rs 0.994 billion against Rs 0.993 billion and other sector and enterprise specific exemption caused revenue loss of Rs 18 billion in 2013-2014 against Rs 15 billion in 2012-13.
The customs duty related notifications caused an accumulative loss of Rs 131.451 billion in 2013-14 against Rs 119.706 billion in 2012-13, showing an increase of Rs 11.745 billion. Customs exemptions are given on raw materials and components; plant, machinery and equipment imported by the industries particularly export oriented sectors. Some of these exemptions are due to international bilateral/multilateral agreements without trading partners like China, Malaysia and SARRC countries.
