Exemptions regime, which is eating away revenues worth billions of rupees annually, will be phased out in a gradual fashion under a comprehensive strategy evolved by the Federal Board of Revenue (FBR).
The exemption regime would be eliminated in phases within the next ten years possibly, Chairman Federal Board of Revenue (FBR), Muhammad Abdullah Yusuf told APP here on Wednesday. "We have to move away from exemption regime if we have to generate maximum revenue," he said adding that the FBR would gradually tread towards this end and implement the reforms in phases.
Abdullah Yusuf, who is also Secretary General of the Revenue Division, said "it was not possible at present to eradicate the exemptions regime completely in one go as was done by Egypt adding that "it is a process, which would be completed in phases to facilitate the sectors utilising this facility as well as enabling the board to deal with the matters properly."
The government had introduced the exemptions regime to enhance local industrialisation, capacity building, production competitiveness efficiency, however, on the other hand it miserably affected the revenue generation in the country.
He was of the view that if there was any need to give relaxation or support to some sectors, the government could provide direct subsidy to them rather than exempting from taxes. He said that FBR has been loosing a staggering amount of revenue due to this regime adding that if it is dismantled, the board would be able to generate about 50 percent more of the current revenue generation.
He said that there were several sectors, which have been put under tax exemptions regime adding that these sectors have great potential to generate revenue as they were considerably contributing towards the GDP growth of the country. For example, the FBR chairman added, the contribution of agriculture to GDP is over 22 percent but its share in the revenue is hardly one percent, amounting to Rs 2 billion only.
Similarly, he added, the share of stock market and transport sectors is far less than their contribution to GDP adding that this would be streamlined in the economic interests of the country.
To a question, the FBR chairman said that exemptions regime coupled with improper tax collecting management had resulted in huge losses of revenue, adding that the board has taken revolutionary steps to overcome such challenges. He said that the FBR had set target of 10 years to streamline all the tax issues, expressing hope that the exemption regime would be eliminated during this period.
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