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ISLAMABAD: Total tax exemptions, concessions, zero-rating and special tax treatments to various businesses, sectors/industries, lobbies/groups and investors have cost the government Rs3,879.2 billion in 2023-24 against Rs2,239.6 billion in 2022-23, reflecting an increase of Rs 1,639.6 billion.

The tax expenditure report-2024 issued on Tuesday revealed that the cost of tax exemptions registered a growth of 73 per cent during 2023-24 as compared to tax expenditure in 2022-23.

The tax expenditure report-2024 has not mentioned revenue loss on account of tax exemptions available to industrial units located in erstwhile tribal areas during 2023-24.

Tax exemptions for steel, ghee units in Fata/Pata: Industries urge govt not to give any extension, threaten to shut down units

Out of the total cost of exemptions of Rs3,879.2 billion in 2023-24, sales tax exemption (SRO.321(I)/2022) on local supplies of petroleum products caused a massive revenue loss of Rs 1,257,513 million during the current fiscal year.

The Economic Survey (2023-24) released here on Tuesday disclosed that the sales tax expenditure remained highest during 2023-24 as compared to revenue loss on account of income tax and customs duty. All kinds of sales tax exemptions/concessions caused revenue loss of Rs 2,858.721 million; followed by customs duty loss of Rs 543,521 million and income tax revenue loss of Rs476,960 million during 2023-24.

The single-largest contributor to the surge in sales tax exemptions was the exemption from sales tax on petroleum products through statutory regulatory orders (SROs), showing a massive revenue loss of Rs 1,257,513 million during 2023-24. The sales tax exemption on import of petroleum products caused revenue loss of Rs 81,225 million during this period.

The survey disclosed an interesting figure that the fixed sales tax regime on cellular mobile phones caused a revenue loss of Rs33,057 million in 2023-24 as compared to Rs1,021 million in 2022-23.

The Federal Board of Revenue (FBR) has suffered a revenue loss of Rs214 billion on account of sales tax exemption on imports during 2023-24 as compared to Rs257 billion during 2022-23, reflecting a decrease of Rs43 billion.

Sales tax exemption on local supplies caused a revenue loss of Rs461 billion in 2023-24 as compared to Rs133 billion in 2022-23, reflecting an increase of over Rs328 billion.

The cost of income tax exemptions amounted to Rs476.9 billion against Rs423.9 billion, showing an increase of Rs53 billion and the cost of customs duty exemptions was Rs543.5 billion in 2023-24 against Rs521.7 billion in 2022-23, reflecting an increase of Rs21.8 billion.

The Economic Survey has not mentioned revenue loss on account of exempt business income granted to independent power producers (IPPs).

Similarly, the survey has not mentioned any revenue loss from capital gains. The accumulative revenue loss on account of tax credits amounted to Rs24.374 billion in 2023-24 against Rs52.133 billion in 2022-23, showing a decrease of Rs27.75 billion.

The income tax exemption from special provisions of the Income Tax Ordinance has caused revenue loss of Rs 62.756 billion during 2023-24 as compared to Rs 68.841 billion during 2022-23.

The income tax exemption from total income has revenue impact of Rs 293.460 billion during the period under review.

The income tax exemption available to the government income caused revenue loss of Rs57.517 billion during this period.

The income tax exemption available to the deductible allowances caused revenue loss of Rs 5.912 billion in 2023-24 against Rs 14.506 billion, showing a decrease of Rs8.594 billion.

The reduction in income tax rates has revenue implications of Rs 25.492 billion during 2023-24 as compared to Rs 24.444 billion in 2022-23, showing an increase of Rs1.048 billion.

The FBR has suffered a massive revenue loss of Rs675 billion in 2023-24 as compared to Rs390 billion in 2022-23 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss on account of sales tax exemption (import and domestic stage) has been increased by Rs 285 billion.

The FBR has suffered a loss of Rs357.997 billion due to sales tax exemptions available under the Eight Schedule (Conditional Exemption/reduced rates) of the Sales Tax Act, 1990, during the period of 2023-24 against Rs129.906 billion in 2022-23. The revenue loss from conditional exemptions has been increased by Rs228.091 billion.

The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs206.053billion during the period under review against Rs139.448 billion in 2022-23, reflecting an increase of Rs66.605 billion.

The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account.

The cost of income tax exemptions increased from Rs423.9 billionin 2022-23 to Rs476.960 billion in 2023-24, reflecting a decrease of Rs53 billion.

The cost of exemptions in respect of customs duty has been calculated at Rs543.521 billion in 2023-24 as compared to Rs521.7 billion in 2022-23, reflecting an increase of Rs21.821 billion.

The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs34.864 billion in 2023-24 against Rs22.240 billion in 2022-23, reflecting an increase of Rs12.624 billion.

The concessions under the Fifth Schedule of the Customs Act, 1969 caused a revenue loss of Rs190.688 billion in 2023-24 against Rs172.978 billion in 2022-23, reflecting an increase of Rs17.71 billion.

The FBR has revenue loss of Rs44.107 billion in 2023-24 against Rs102.658 billion in 2022-23 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs). The revenue loss has been drastically reduced by Rs 58.551 billion.

Similarly, exemption of customs duty on the items by the automobile sector, exploration and production (E&P) companies, general concessions and the CPEC caused a loss of Rs146.598 billion in 2023-24 against Rs192.950 billion in 2022-23, showing a decrease of Rs 46.352 billion.

The export-related exemptions cost revenue loss of Rs127.264 billion during 2023-24 against Rs30.878 billion during 2022-23, reflecting a massive increase of Rs96.386 billion.

Copyright Business Recorder, 2024

Comments

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Kulachi Khan Jun 12, 2024 10:21am
The correct way is to look at the net cost-benefit analysis. Tax exemptions are never one-way phenomenon; the benefits may accrue from another angle.
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KU Jun 12, 2024 02:36pm
True observation by comment on cost-benefit analysis. But the in-your-face reality is that we should call it ''Budget and the Enemy Within'', because much detail on exemptions are hidden by Raj.
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