ISLAMABAD - Finance Minister Senator Ishaq Dar on Friday chaired a high-level meeting to review the plan being prepared by Federal Board of Revenue (FBR) to identify tax exemptions granted through Statutory Regulatory Orders (SROs), as cost of exemptions are in hundreds of billions of rupee per year.
Pakistan has committed with International Monetary Fund (IMF) to withdraw the SROs in next three years. A committee headed by Chairman FBR is preparing a plan to to identify tax exemptions granted through SROs that are creating distortions in the taxation regime. The committee would present its report to the Finance Minister by December 31 2013. The government is considering withdrawing few tax exemptions from the start of next year January 2014 and certain exemption would be withdrawn in upcoming budget 2014-15. Similarly, the remaining exemptions would be taken away in subsequent two fiscal years.
According to a report, the cost of sales tax exemption is around Rs 242 billion, customs duty nearly Rs 161 billion and if cost of income tax exemptions comes to over and above Rs 50 billion, total cost of exemptions cross Rs 500 billion.
The IMF had asked Pakistan not to limit its ongoing exercise to just identifying loopholes created in the tax system to appease various lobbies. It has, instead, sought the government’s concurrence of the plan to withdraw identified exemptions; otherwise Islamabad will have to levy more taxes. In July this year, IMF asked Pakistan to carry out a detailed exercise to identify tax exemptions granted through Statutory Regulatory Orders (SROs) and complete the process by December this year. The identification exercise was a structural condition aimed at ensuring the government was committed.
Meanwhile, according to the press statement issued by Finance Ministry, the Chairman, FBR Tariq Bajwa apprised the Finance Minister on the efforts being made by FBR to achieve the revenue targets set in the budget. During the four-hour long meeting the Finance Minister was briefed on a plan being prepared by FBR for withdrawal of Statutory Revision Orders (SROs).
During the meeting a threadbare discussion was held on the existing SROs issued for concessions in Income Tax , Customs and Sales Tax . The Chairman informed the Finance Minister that the plan would be finalised under the broad guidelines discussed during the meeting by December 31, 2013.
The meeting was attended by Secretaries Finance and Commerce, Advisor on Finance/ senior officials of FBR , Finance and National Tariff Commission.