- The government hopes to raise Rs.150 billion to Rs. 200 billion by abolishing tax exemptions
- Government abolished tax exemptions to please IMF board of directors before budget is finalized for 2021-22
ISLAMABAD: In order to satisfy the International Monetary Fund (IMF), the federal government has planned to abolish the exemption from corporation tax (CIT) either through a presidential ordinance or through the introduction of a law before parliament.
“We are examining all available options, including promulgating a presidential ordinance or submitting a bill to parliament to abolish corporate tax exemption and raise Rs.150 billion to 200 billion. So far, however, nothing has been decided, ”the main official sources told The News.
Sources suggest that the Federal Board of Revenue (FBR) has completed the withdrawal of CIT exemptions from the 2001 Income Tax Ordinance. It remains to be seen how many exemptions will be abolished with the approval of policy makers, they added.
The move is taken as the government hopes to please the IMF Executive Board before starting budgeting for 2021-22.
Read more: IMF will release $ 500 million to Pakistan after reforms pending board approval
The government is likely to put a separate bill in parliament to show that it is serious about withdrawing the exemptions.
In the meantime, the FBR believes that it is practically impracticable to revoke CIT exemptions either through regulation or bill, but believes the easy way is to use the finance law for 2021-22.
The IMF negotiators were not interested in this option, however, as it would be a more difficult task for them to convince their board of directors to revive the stalled program for Pakistan.
Reduction of revenue recognition targets
Pakistani negotiators also tried to convince the IMF to lower the FBR’s annual tax collection target from Rs 4,963 billion to Rs 4,550 billion.
Read more: FBR exceeds seven month tax target by 17 billion rupees
Although a decision has not yet been taken on this, Pakistani officials are making last-minute efforts to convince IMF negotiators before sending their review report to the board.
When contacted, the Pakistan-based head of the IMF, Teresa Daban Sanchez, replied on Wednesday evening: “The authorities are committed to a financial strategy anchored in the sustainable primary deficit approved in the 2011 budget. Remember that the primary deficit is a key parameter in the program supported by the Enlarged Finance Facility. “