The Pakistan Tehreek-eInsaf (PTI) government has planned to introduce a new legislation to withdraw income tax exemptions availed by the corporate sector to raise around Rs200 billion in additional taxes as part of its efforts to revive the stalled International Monetary Fund (IMF) programme.

The government was considering either introducing a finance bill in the National Assembly or promulgating a presidential ordinance next month to satisfy the IMF’s demand for additional tax measures, said sources in the Federal Board of Revenue (FBR).

However, according to deliberations, the legal changes would not be immediately enforced, rather the date of application could be from next financial year, said the sources.

Finance ministry sources said that the prime minister had again refused to increase electricity tariff by Rs1.48 per unit and it had also been conveyed to the IMF. The increase in electricity prices is among the four major demands of the IMF for reviving the loan programme.

The proposed arrangement for implementing the new tax measures from next fiscal year was aimed at meeting the IMF condition of withdrawing income tax exemptions and at the same time not immediately burdening businesses with additional taxes in the wake of adverse impact of Covid-19 on the economy, said the sources.

They added that the FBR and the IMF technical staff were engaged in finalising the tax exemptions and income tax credits that could be withdrawn through the new legislation.

IMF officials and Pakistani authorities were discussing clause-by-clause the corporate income tax exemptions, said the sources. FBR sources said that the authorities were discussing with the IMF the corporate income tax exemptions, tax credits and certain exemptions available under Fifth Schedule of the Income Tax Ordinance to oil and gas exploration and production companies.

These measures would generate an extra Rs200 billion in taxes but it was not final how much of the concessions would be withdrawn soon, said the sources.

The IMF has projected a shortfall of over Rs350 billion against the annual tax target of Rs4.963 trillion. However, the government wanted to bridge some of the gap through increasing collection of petroleum levy and gas infrastructure development cess, said the sources.

Discussion with the IMF on the exemptions was expected to be concluded by next week, the sources said.

“We are working on tax reforms, however, any change in the taxation structure will be enforced only after the economy recovers from the adverse effects of the coronavirus,” said Kamran Afzal, Special Secretary and spokesman for the Ministry of Finance.