ISLAMABAD: Federal Board of Revenue (FBR) Chairman Javed Ghani Tuesday said the government would withdraw corporate income tax exemptions within the range of Rs70 to Rs140 billion through the proposed Income Tax (Second Amendment) Bill, 2021.
Sharing details of the bill, he said that the FBR has estimated an amount of Rs70 to Rs 140 billion from these exemptions, but it depends on how the economy would behave in future.
He clarified that all these measures of withdrawal of exemptions would be applicable from July 1, 2021. There would be no impact of these exemptions in next 3-4 months. The impact of the withdrawal of exemptions would be applicable during the whole next fiscal year.
The cost of tax exemptions and subsidy granted on the direct taxes side stood at Rs380 billion during 2019-20. Partially exemptions would be withdrawn and it would depend on the economy that how it would move in future.
He said that the government has not imposed any new tax during the whole fiscal year of 2020-21. However, the government has given exemptions on many food items and cornea related items during the last six months.
Besides, duties and taxes were reduced on raw materials and intermediary products and reduced withholding taxes at the time of budget.
He said that as per last tax expenditure report (tax exemption statement), the cost of exemptions was calculated at Rs1185 billion covering all federal taxes. The amount of relief provided through these exemptions is much higher compared to other comparable countries including India.
Keeping in view the policy to increase reliance on the direct taxes, the FBR has reviewed the corporate income tax exemptions with the development partners.
Under the Income Tax Amendment Bill, 2021, the specific corporate income tax exemptions have been brought into the general exemptions regime and a number of general exemptions would be provided the facility of tax credit. The general exemptions would be brought into the tax credit regime. “We have followed the best international practice while reviewing of corporate income tax exemptions for providing facility of the tax credits,” he added.
Copyright Business Recorder, 2021