ISLAMABAD: The ratio of tax exemptions, granted under the income tax, sales tax and customs duties, increased by Rs188 billion this year, which is 39 per cent more than the last year’s tax exemptions.
According to the Pakistan Economic Survey 2014-15, the increase comes during a year when the government withdrew tax exemptions totalling Rs104 billion as the first phase of total withdrawal of SROs. The second phase in the withdrawal of exemptions will be announced in the budget to be unveiled today.
Last year, the government announced that all SROs will be withdrawn in three years and the federal finance minister also reiterated this promise during the presentation of the economic survey.
Ishaq Dar said that these powers are misused by the lower levels of the tax machinery, adding, “These powers fuel corruption as well. They need to be taken out of the hands of the tax bureaucracy.”
As per the Pakistan Economic Survey report, the income tax exemptions witnessed fall in two specific areas as capital gains fell to Rs2.5 billion in fiscal year 2015 from Rs5 billion last year. And the sector and enterprise specific exemptions also dropped to Rs9.5 billion this year from Rs18 billion over the corresponding period of last year.
Two major changes have taken place in the sales tax exemptions as the government has shifted the SRO-based exemptions into the schedules of the Sales Tax Act of 1990. Secondly, sales tax exemptions have surged by a robust 92.12 per cent to Rs478.4 billion in 2014-15.
The customs exemptions decreased to Rs103 billion in 2014-15 from Rs131 billion in the last year, showing a decline of 22pc. These exemptions grew out of the preferential trade agreements that Pakistan signed in the recent past and other duty exemptions.
The break-up showed that maximum exemptions in customs duties available on imports from China under the Free Trade Agreement, which reached Rs26.6 billion in the outgoing fiscal year from Rs21 billion last year, increased by 27pc.
