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Tag: tax exemptions

  • Key proposals to withdraw tax exemptions

    Key proposals to withdraw tax exemptions

    ISLAMABAD: The government is going to withdraw various exemptions allowed under Income Tax Ordinance, 2001.

    The exemption may be withdrawn through Income Tax (Second Amendment) Ordinance, 2021, the sources said on March 21, 2021.

    Following are the highlights of the proposed law:

    It is proposed to omit power of Federal Board of Revenue (FBR) to declare any sector or industry as industrial under taking under Section 2 Clause (29C) of Income Tax Ordinance. 2001.

    Under Section 23A of the Income Tax Ordinance, 2001 it is proposed to omit first year allowance equal to 90 percent of the cost of plant and machinery to mobile phone manufacturers and other industrial undertakings located in underdeveloped areas.

    Under Section 61 of the Income Tax Ordinance, 2001 it is proposed to enhance the scope of tax credit for contribution to non-profit and other organizations as direct deduction of such expense is being proposed to be done away with by omitting clause 61 of part I of the second schedule.

    Under Section 64C of the Income Tax Ordinance, 2001, it is proposed to omit tax credit available to persons employing fresh graduates. It was available maximum up to 5 percent of the tax liability.

    Under Section 65C of Income Tax Ordinance, 2001 it is proposed to omit tax credit to companies equal to 20 percent of tax payable for first two years and 10 percent for next two years  of enlistment at stock exchange.

    Section 65D of Income Tax Ordinance, 2001, it is proposed to omit tax credit available to newly established industrial undertakings.

    Under Section 65F of Income Tax Ordinance, 2001, it is proposed that the exemptions available to persons engaged in coal mining in Sindh, IT exports and startups to be replaced with tax credit.

    Under section 65G of Income Tax Ordinance, 2001, the exemptions available to greenfield industrial undertakings and industries engaged in manufacture of plant, machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy have been proposed to be replaced with tax credit on the basis of  investment made in plant machinery, building, computer, hardware and software.

    Under Section 100C of Income Tax Ordinance, 2001 law related to tax credit available to charitable organizations has been re-drafted to make it simpler & easier besides streamlining the regime with other provisions. No substantial change.

    Under Section 152 of Income Tax Ordinance, 2001, technical correction in sub-section (1E) to synchronize with other sub-sections

  • Bill to be presented for abolishing tax exemptions

    Bill to be presented for abolishing tax exemptions

    ISLAMABAD: The government will present a bill before the parliament to abolish tax exemptions that are discriminate towards many individuals and sectors of the economy.

    Minister for Finance and Revenue Dr. Abdul Hafeez Shaikh said this at a press conference on Tuesday.

    He said many companies and sectors are exempted from the taxes and to abolish such discrimination and to bring uniform system all such exemptions would be brought under the law.

    He said under Prime Minister Imran Khan’ vision to collect taxes in a way that poor people should not be affected, tax system is being reformed.

    He said that the cabinet approved draft of State Bank of Pakistan (SBP) Amendment Bill 2021 to give absolute autonomy to the Central Bank.

    He said the central bank’s core objective was to control inflation and to fight increase in prices and the law also aimed at providing the Bank further autonomy to ensure that it fulfills its objectives of price stability with complete independence.

    He said the law would also help SBP to independently fulfill the requirements of monetary policy and exchange rates without intervention of the the government. The term of Governor SBP, he said would also be extended to five years.

    Hafeez Shaikh said the government would stop borrowing from the central bank so that the federal government could manage financing by its own resources or by lending from the commercial banks.

    Further he said the monetary and fiscal coordination board would also be abolished and instead the government would arrange coordination through special committees.

    The minister informed that the Governor would be appointed by the President of Pakistan and the Bank would only be accountable to the Parliament.

    He informed that the second law approved by the cabinet was about Pakistan’s State Owned Entities (SOEs) that were engaged in business activities.

    The purpose of this law is to provide more authority to the SOEs by stopping intervention of the ministries and the ministers.

    The board and the Chairman would be appointed by the government under a transparent and professional way and the CEOs of the institutions would appoint the boards, instead of the minsters so that professionalism in these areas should be promoted.

    Further he said the CEOs would be made more secure so they run their companies without any pressure to compete with the private sector.

    He pointed out that these bills would be followed on fast track basis.

    About International Monetgary Fund, Shaikh said Pakistan and the IMF were currently engaged to resume the Extended Fund Facility that was paused for few months due to COVID-19.

    “The IMF international Board would meet soon and financial lending for Pakistan will resume”, he added.

    Adviser to Prime Minister on Institutional Reforms Dr. Ishrat Hussain on the occasion said major reforms in the institutions were being introduced to promote transparency and professionalism in the government departments.

    He said the due to these reforms, losses in government institutions were drastically reduced and efforts were made to wipe out all losses in future.

    To a question, Shaikh said privatization was a difficult task and big investors were needed in this process.

    He said the privatization programme was being extended and the process was now resumed after a temporary halt due to COVID-19.

    To another question, he said the government was minimizing gap between the income and the expenditure and the primary fiscal balance was in surplus of Rs 400 billion.

    Besides, he said the government had also not borrowed a single rupee from the Central Bank nor it provided additional grants to the government departments.

    About inflation, he said the government had not control over the prices of such basic kitchen items which are imported from abroad.

    However, the government in this regard can only do to provide assistance to the extreme people and it is providing financial support to over 15 million, he added.

    Further he said at utility stores too, the government was providing the basic usable items at affordable prices to the targeted income group. He informed that the targeted subsidy would be further extended in future.

    Minister for Industries Hammad Azhar said that utility stores was providing wheat flour at a subsidized rate of Rs 800 per 20 kg bag, sugar at Rs 68 per kg, ghee at Rs 125 per kg and the price was retained for over a year an it has been decided that this price would continue in future as well.

    Chairman Federal Board of Revenue Javed Ghani and Secretary Finance Kamran Afzal were also present on the occasion.

  • All tax exemptions to have sunset clause: MTEF

    All tax exemptions to have sunset clause: MTEF

    ISLAMABAD: The ministry of finance on Monday launched Medium-Term Economic Framework (MTEF), which envisaged that all permanent exemptions to be withdrawn or have a sunset clause.

    The MTEF said that presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

    In addition, even the revenue objective is compromised by large scale exemptions.

    To correct this shortcoming, the government intends the following:

    i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption.

    ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions.

    iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

    iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

    v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament.

    vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law.