Withdrawal of tax exemptions to take toll on trade & industry, say experts

Business leaders and economic experts have expressed concern over the government’s decision to withdraw tax exemptions through presidential ordinances, saying that it will have a negative impact on the country’s trade and industry.

“Pre-budget withdrawal of a number of exemptions will affect trade and industry negatively,” Mian Nasser Hyatt Maggo, President of Federation of Pakistan Chambers of Commerce and industry (FPCCI), told Arab News..

FPCCI President further said that the recent decision will weaken Pakistan’s position at the ease of doing business ranking. “This will further aggravate the situation,” he said.

The government has withdrawn a wide range of income tax exemptions to the emerging sectors and industries including IT sector; exemption on profit and gains derived by LNG terminal operators and terminal owners and exemption available to the Pakistan Mortgage Refinance Company under the Tax Laws (Second Amendment) Ordinance, 2021.

The withdrawal of exemptions was made in line with on-going negotiations with the IMF to withdraw income tax exemptions worth Rs140 billion.

The government has withdrawn exemption on any gain on transfer of a capital asset, being a membership right held by a member of an existing stock exchange, for acquisition of shares and trading or clearing rights acquired by such member in new corporatized stock exchange in the course of corporatization of an existing stock exchange.

The government has also withdrawn exemption on any income chargeable under the head “capital gains” derived by a person from an industrial undertaking set up in an area declared by the Federal Government to be a “Zone” within the meaning of the Export Processing Zones Authority Ordinance, 1980.

“The exemptions will affect modarabas and new companies to be listed (on Pakistan Stock Exchange),” Muhammad Sohail, CEO of the brokerage Topline Securities. “No major impact on the masses is expected,” he added.