ISLAMABAD: A plan containing a list of tax exemptions to be withdrawn from April 1, 2014 onward to raise more revenue is to be presented to the Prime Minister on December 30 for approval.
The plan for fiscal adjustments and a road map for withdrawal of tax exemptions starting in April 2014 is expected to be announced by the Government next week.
A senior official has said that the government is required under the IMF programme to announce a detailed three-year road map for withdrawal of discretionary SROs in the taxation system.
“Except for tax exemption on the income of the State Bank of Pakistan, unpacked essential kitchen items, life saving drugs, import of crude oil and major products like furnace oil, everything under the sun would come under tax net at the conclusion of financial year 2015-16 on June 30, 2016,” he said.
Under the entire programme period, the SRO’s worth Rs 400 billion will be withdrawn in three years, he added. Total impact is estimated at about Rs 125 billion or 0.5 per cent of GDP for current fiscal year.
The official said the prime minister would be given a comprehensive briefing on Monday on the latest economic situation and steps to be taken to meet commitments made with the IMF for approval.
These would include imposition of a gas levy worth Rs 100 billion or 0.4 per cent of GDP on all categories excluding domestic consumers with effect from January 1 and withdrawal of tax exemptions under SRO with effect from April 1, 2014.
“Chairman Federal Board of Revenue has apprised the finance minister on the efforts being made by FBR to achieve the revenue targets set in the budget and a plan is being prepared for withdrawal of SROs,” an official statement said. During a meeting, threadbare discussion was held on the existing SROs issued for concessions in Income Tax, Customs duty and Sales Tax.
The finance minister gave broad guidelines to FBR for finalization of SRO withdrawal plan. The meeting was also attended by secretaries of finance and commerce and top officials of FBR and National Tariff Commission.
Under a commitment given to the IMF, the authorities envisage measures yielding about 0.75 per cent of GDP in each of the subsequent years over the next two years.
“The focus will be on eliminating exemptions and concessions embedded in the SROs and in the law, as well as on eliminating the power of the executive to grant preferential tax treatment through SROs. These steps will facilitate gradually moving the GST to a full-fledged integrated VAT-style modern indirect tax system with few exemptions and to an integrated income tax by 2016-17,” according to the statement.
The sales tax exemptions at present are estimated to have a revenue impact of more than Rs 240 billion besides over Rs 150 billion on account of customs duty exemptions and other areas like income tax etc.