ISLAMABAD - The government has given massive tax exemptions worth Rs1.15 trillion in ongoing fiscal year, which are 18.26 percent higher than the exemptions given last year.

Pakistan’s tax expenditures in the form of exemptions have been recorded at Rs1,149.95 billion during the ongoing financial year 2019-2020 as against Rs972.4 billion of the previous fiscal year 2018-19, showing an increase of over 18.26 percent, the latest Economic Survey showed.

The government has given massive tax exemptions at the time when Federal Board of Revenue (FBR) is continuously failing to achieve its targets. The FBR is all set to miss the annual tax collection target of Rs5.55 trillion by Rs1.647 trillion during ongoing financial year. The Federal Board of Revenue (FBR) tax collection would record at Rs3.908 trillion after COVID-19 against the initial target of Rs5.55 trillion. The FBR would also miss the revised target of Rs4.8 trillion by Rs892 billion.

The Economic Survey showed that government had given income tax exemptions worth of Rs378.03 billion in FY20 as compared to Rs141.6 billion in the last year.  Meanwhile, the cost of sales tax exemptions has been estimated to be Rs518.8 billion and cost of customs exemptions has been projected at Rs253.11 billion during FY20.

In income tax, the government has given exemptions worth of Rs36.4 billion in allowances, Rs104.5 billion in tax credits, Rs212 billion exemptions from total income, Rs128 billion in reduction in tax rates, Rs2.986 billion in reduction in tax liability and Rs18.934 billion from government income during the year 2019-20.

The government has given sales tax exemptions worth ofRs518.8 billion in FY20, which has reduced from Rs597.7 billion in FY19. According to the survey, sales tax exemptions were provided under the export facilitation schemes and general and sector specific SROs. The government has given exemption worth Rs13.671 billion from Zero Rating under Fifth Schedule, Rs255.8 billion exemptions on imports, Rs54.871 billion exemption on local supplies, Rs74.008 billion exemptions on reduced rates under eighth schedule (2%), Rs8.677 billion as reduced rates under eighth schedule (5%), Rs35.452 billion as reduced rates under eighth schedule (10%), Rs53.138 billion as other reduced rates and Rs23.154 billion as sales tax on cellular mobile phones under ninth schedule in FY20.

The customs exemptions surged to Rs253.111 billion in FY20 from Rs233.1 billion in FY2019. The increase was mostly on account of preferential trade agreements (PTAs), especially with China that Pakistan signed in the recent past and other duty exemptions. Maximum exemptions were given in customs duties to the original equipment manufacturers (OEMs) of the automotive sector and vendors. In customs, the government has given exemptions worth Rs10.649 billion to chapter-99 exemptions, Rs45.020 billion as FTA & PTA exemptions, Rs87.859 billion as 5th schedule exemptions & concessions, Rs95.420 billion exemptions as General Concessions: automobile sector, E&P Companies, CPEC, etc, Rs4.773 billion exemption of additional customs duty and Rs9.390 billion as exemption of regulatory duty.