ISLAMABAD: The Federal Board of Revenue (FBR) has estimated an amount of Rs69.5 billion as tax gap under Section 41 (agricultural income) of the Income Tax Ordinance on account of provinces having the mandate to levy tax on agriculture incomes. This has been mentioned in the Statement of Estimated Tax Expenditure of the federal government issued by the FBR in the federal budget (2020-2021).
The cost of tax reduction granted to judiciary of superior courts including perquisites, benefits and allowances received by judges of the Supreme Court and judges of the High Court amounted to Rs283 million during 2019-2020.
According to the statement, "the cost of exemption amounted to Rs2,771 million to any income derived by Sukuk holder in relation to Sukuk issued by The Second Pakistan International Sukuk Company Limited and the Third Pakistan International Sukuk Company Limited, including any gain on disposal of such Sukuk.
The profits and gains derived by a taxpayer from an electric power generation project set up in Pakistan on or after the 1st day of July, 1988 amounted to Rs26,888 million.
Sales tax zero-rating under 5th Schedule to Sales Tax Act, 1990, caused a revenue loss of Rs13,671 million and exemption of sales tax on imports stood at Rs255,843 million.
Sales tax exemption on local supplies cost a revenue loss of Rs54,871 million; reduced sales tax rate (two percent) under 8th Schedule caused a revenue loss of Rs74,008 million; reduced rates under 8th Schedule (five percent) revenue loss of Rs8,677million; reduced rates under 8th Schedule (10 percent) Rs35,452 million; other reduced rates caused revenue loss of Rs53,138 million and reduced sales tax on cellular mobile phones under 9th Schedule have revenue impact of Rs23,154 million.
The customs duty exemption on the import of plant, machinery, equipment and apparatus, including capital goods for various industries/sectors caused a revenue loss of Rs20,758 million.
Under 5th Schedule (Customs Duty)-Part III, customs duty exemption available to poultry and textile sectors caused revenue loss of Rs25,865 million.
The exemption available on the import of the essential edible items such as pulses, potato etc, oil and oil products, inputs of export sectors etc caused revenue loss of Rs25,026 million.
The cost of exemptions of federal tax stood at Rs1,150 billion during 2019-2020, according to the Statement of Estimated Tax Expenditure of the federal government issued in federal budget 2020-2021. This is for the first time that such Statement of Estimated Tax Expenditure of federal government has been issued by the government at the time of budget.
According to the Statement of Estimated Tax Expenditure of the federal government, the tax expenditure from federal taxes, in FY 2020, amounted to an estimated Rs1,150 billion. tax expenditure in sales tax amounts highest at Rs518.8 billion (45 percent of the total), while in income tax, it amounts to Rs378 billion (33 percent), and in Customs, at Rs253.1 billion (22 percent).
In the last fiscal year, the FBR's tax collection was Rs3,828 billion. Hence, tax expenditure to total collection ratio comes to about 30 percent, and tax expenditure to the GDP ratio stands at around three percent.
The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the statement.
Tax expenditure estimate for income tax revealed that the allowances caused revenue loss of Rs36,435 million; tax credits Rs104,498 million; exemptions from Total Income Rs212,070 million; reduction in tax rates Rs128 million; reduction in tax liability Rs2,986 million; exemption from specific provisions Rs2,975 million, and cost of exemptions from category of others/miscellaneous stood at Rs18,934 million."
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