ISLAMABAD: Like previous governments, the PML-N government has promoted the culture of tax exemptions and issued over 80 orders to reportedly benefit influential people in the first nine months (July to March) of the current financial year.
Soon after coming to power, the PML-N government had constituted a committee to review implications of the statutory regulatory orders (SROs) issued by the previous governments.
A study carried out by the government has revealed that yearly tax exemptions amount to Rs478 billion — nearly two per cent of the gross domestic product.
Several meetings chaired by finance minister have been held to review the study and identify concessions and exemptions which could be rationalised, simplified and minimised in or removed from the budget for 2014-15. But an official source said that influential lobbies were not ready to pay taxes and insisted on availing the exemptions.
The present government has so far issued eight SROs for customs duty exemption. A customs official said the revenue loss caused by incentives given to motorcycle manufacturers was yet to be calculated.
The government has issued 24 SROs for granting income tax exemption. Seven of them directly involve tax exemption of millions. The government has extended some of the income tax exemptions through SRO669(I)/2013 (amendment in second schedule of income tax); SRO739(I)/2013, SRO772(I)/2013, SRO799(I)/2013 and SRO828(I)/2013 (Different tax returns); SRO900(I)2013 (rate of income tax reduced for goods transport); SRO904(I)/2013 (rules for collection of income support levy); SRO978(I)/2013 (exemption from filing of wealth statement; SRO980(I)/2013 (rate of tax for passenger transport vehicles); SRO1040(I)/2013 (immunity from audit for tax year 2013); SRO1035(I)/2013 (rules for banking companies reporting); SRO1065(I)2013 (incentives for industrial undertaking); SRO1064(I)/2013 (rate of duty reduced for goods transport) and SRO17(I)/2014 (partial exemption on fee paid to educational institutions).
It issued SROs to grant one per cent further sales tax exemption. These are (SRO648 (I)/2013, change of mode of collection to production capacity basis from aerated water (SRO649 (I) 2013); reducing of sales tax from 17 percent to 5 percent on finished products of textile and leather products (SRO682 (I) 2013); reduction of tax rates on touch mobile phones (SRO740(I)/2013); and sales tax rate reduced from 17 pc to 1 pc in cases of purchases made from unregistered persons (SRO897(I) 2013).
SRO1072 was issued to charge federal excise duty at the rate of 0.5pc as against the applicable rate of 8pc on local sale of sugar to benefit a handful of political families which owned sugar mills. The concession is in addition to Rs12bn-Rs20bn sales tax exemption.
Preferential trade agreements signed with other countries in the recent past also caused huge revenue losses because they were not properly negotiated to safeguard the country’s interests.
According to an official of the customs department, just one SRO issued for the implementation of a preferential trade agreement with Indonesia is likely to cause a loss of Rs3.5bn to the exchequer.
Customs duty exemptions were granted through SRO687(I)/2013 (procedural changes); SRO742(I)2013 (regulatory duty imposed on sport utility vehicles); SRO939(I)/2013 and SRO940(I)/2013 (reduced customs duty for new entrants in motorcycles manufacturing industry); SRO1 073(I)/2013 (amendment in existing Safta).