ISLAMABAD: Income tax exemption on profits and profits from power generation projects in Pakistan has resulted in revenue losses of Rs 47 billion in 2019-20.
According to the FBR’s expenditure report (2021) published here on Sunday, the income tax exemption granted to exporters of computer software, IT services, or IT-enabled services is derived from the income from the export of computer software or IT services or IT-enabled services revenue resulted in loss of 1.944 billion rupees.
The reduced sales tax rate for all types of fertilizers resulted in a loss of revenue of Rs 73.968 billion; Pesticides and their active ingredients Rs 18.108 billion; Milk Rs 17 billion and drug / drug sales tax exemption has an impact on revenues of Rs 91.892 billion.
The exemption from tariffs on imports under the Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA) caused revenue losses of 34.210 billion rupees in 2019-20.
The Federal Board of Revenue (FBR) 2021 Federal Tax Spend Report for federal taxes is based on 2019-20 data and is estimated at Rs. 1,314.27 billion. Sales tax expense was Rs. 578.46 billion, 44 percent of the total ), while income tax is Rs. 448.05 billion (34 percent) and customs duty is Rs. 287.77 billion (22 percent). In the last fiscal year 2019-20, the FBR’s tax collection was Rs. 3.997.4 billion. Thus, the ratio of tax expenditure to total collection is around 33 percent and the ratio of tax expenditure to GDP is around 3.2 percent.
Tax expense estimates are unadjusted, which means that the waiver or waiver of a particular tax exemption would not necessarily result in the rupee amounts shown in this report. Actual revenues will depend on enforcement, taxpayer compliance, the date of entry into force of any legislation repealing the tax exemption, the exact wording of any legislation, the taxpayer’s conduct and some other economic factors. The tax returns do not contain sufficient data to estimate the value of all exemptions and exclusions. The estimation requires the identification of relevant, useful data available from various external sources. If exceptions listed in tables have not been estimated, it is because the required data is not in place or has not been identified and obtained from an outside source, FBR said.
The report revealed that the FBR lost $ 37.318 billion in sales for the past fiscal year due to the exemption granted under the Allowance heading.
The exemption granted to the new business units resulted in lost sales of over 30 billion rupees.
The revenue impact is Rs.6.686 billion from the time off leave available to employees (beneficiaries of benefit fund payments) due to benefit fund payments. The employee pension fund had an impact on sales of Rs 5.465 billion during this period.
The income tax exemption available to retirees of retired civil servants / servants and military personnel has an impact on revenues of over Rs 13 billion over the 2019-20 period.
The tax credit available to corporate manufacturing for non-equity investments in equipment and machinery causes a loss of Rs 51.408 billion in sales.
The nonprofit, trust or charity tax credit has an impact on revenues of Rs 18.482 billion.
The tax credit for those who donate to charity has an income effect of Rs.2869 billion, while the tax credit for investments in stocks and life insurance for individuals (excluding companies) who invest in stocks, suckers, or life insurance has an income effect of Rs.22222 has billion.
Within the total income waiver category, pensions granted to retired civil servants and military personnel have caused a loss of over Rs 13 billion.
The income tax exemption available to the trustees of Approved Retirement Funds, Approved Pension Funds, and Approved Incentive Funds has an impact of Rs 13 billion on revenues.
The exemption available to the State Bank of Pakistan and SBP Banking Services Corporation has an impact on revenues of Rs 48 billion.
The tax exemption available to the Pakistani Water and Electricity Development Agency had resulted in a loss of revenue of 19.496 billion rupees.
The bodies of the Pakistan Water and Power Development Authority have lost Rs 5 billion in revenue due to the income tax exemption.
Exemption from all income that a suck holder may have in respect of sukuk issued by The Second Pakistan International Suck Company Limited and Third Pakistan International Sukuk Company Limited, including any gains on the sale of such sukuk an impact of 3.436 billion rupees.
There is an income impact of over 7 billion rupees due to the tax exemption for any income from a foreign government agency, foreign citizen (corporation, firm, or association of persons) or other federally approved non-resident government within the meaning of this clause from profits from funds, that were taken out under a loan agreement or in relation to foreign currency instruments approved by the federal government.
The income tax exemption for collective investment schemes or REIT schemes, collective investment schemes and REIT schemes, which distribute more than 90% of their income to certificate holders / shareholders, has resulted in a loss of 16 billion rupees in sales.
The income tax exemption available to public sector universities has an impact on revenues of Rs 10.715 billion.
The income tax exemption available to oil refineries under Section 126B has an impact on revenues of Rs.1.724 billion.
The power generation project income tax exemption on the profits and profits made by a taxpayer on a power generation project in Pakistan impacts Rs 47 billion in revenue.
The exemption from social security contributions from the four state social security institutions resulted in a loss of revenue of Rs.5.636 billion.
The income tax exemption available to individuals or companies and associations residing in the former tribal areas has lost Rs.4.460 billion in revenue.
The profit and loss exemption granted to LNG terminal operators and terminal owners has an impact on revenues of Rs.1,714 billion, FBR added.
Copyright Business Recorder, 2021