Ishfaq A Mughal
Pakistan lost potential revenue of Rs239.5 billion in the outgoing fiscal year due to tax exemptions policies of PPP-led coalition regime for giving undue favoure to the influential people in the country.
According to the Economic Survey of Pakistan 2012-13, tax exemptions given in the fiscal year were 16.3% higher than the previous fiscal year. These undue exemptions were even more than the amount that the country had received so far under the Kerry-Lugar aid package of the United States.
About half of the exemptions were given in customs duties, 15.7% in sales tax and over a third in income tax, said the survey. During the year, the influential sugar industry joined the ranks of sales tax-exempted sectors.
Huge exemptions coupled with corruption in the Federal Board of Revenue pushed the country’s tax-to-GDP ratio to 8.9%, a lowest level in the region.
The FBR exempted Rs82.3 billion worth of income tax, 18.3% or Rs12.8 billion higher than the previous fiscal year, according to the survey.
The government willingly suffered a loss of Rs48.6 billion due to income tax exemptions given to independent power producers. The second largest amount, Rs15 billion, was written off in favour of the enterprises.
The country suffered losses of Rs4 billion due to lower tax rates on capital gains, revealed the survey.
Furthermore, Rs9.1 billion worth of tax was waived on income from various funds and educational institutions that were collecting hefty fee from the students.
Sales tax exemptions that stood at Rs24.3 billion last year, rose to Rs37.5 billion this time around, mainly because of partial tax breaks given to the influential sugar industry.
Sales tax exemptions grew 54% over the previous year. Sugar industry was exempted from paying Rs12 billion sales tax during the period under review.
On sale of tractors, exemptions of Rs2.1 billion were granted. On sale of pharmaceutical products, Rs7.1 billion tax was exempted. In the “others” category, taxes worth Rs16.2 billion were waived.
Customs duties exemptions stood at Rs119.7 billion, showing an increase of Rs7.5 billion or 6.6%. Most of the tax breaks were given to the oil, automobile and textile sectors.
The largest exemption, Rs28.2 billion, was given under the head of general and conditional exemptions that raises questions of transparency as there was no explanation pertaining to these conditional exemptions.
An amount of Rs18.5 billion was waived in favour of the automotive sector. In addition to that, Rs11.1 billion was waived in favour of vendors of the automobile sector.
Duties worth Rs9.2 billion were written off on account of raw material imports. The government also exempted Rs22 billion worth of duties on imports from China, while the national exchequer suffered a loss of Rs2.8 billion due to concessionary imports from Malaysia.
Finance Minister Ishaq Dar said "such a low tax base was a shame for the country", , said while unveiling the survey on Tuesday.
The declining revenues led to massive borrowings to meet soaring expenditures, increasing the country’s debt burden significantly.
Pakistan lost potential revenue of Rs239.5 billion in the outgoing fiscal year due to tax exemptions policies of PPP-led coalition regime for giving undue favoure to the influential people in the country.
According to the Economic Survey of Pakistan 2012-13, tax exemptions given in the fiscal year were 16.3% higher than the previous fiscal year. These undue exemptions were even more than the amount that the country had received so far under the Kerry-Lugar aid package of the United States.
About half of the exemptions were given in customs duties, 15.7% in sales tax and over a third in income tax, said the survey. During the year, the influential sugar industry joined the ranks of sales tax-exempted sectors.
Huge exemptions coupled with corruption in the Federal Board of Revenue pushed the country’s tax-to-GDP ratio to 8.9%, a lowest level in the region.
The FBR exempted Rs82.3 billion worth of income tax, 18.3% or Rs12.8 billion higher than the previous fiscal year, according to the survey.
The government willingly suffered a loss of Rs48.6 billion due to income tax exemptions given to independent power producers. The second largest amount, Rs15 billion, was written off in favour of the enterprises.
The country suffered losses of Rs4 billion due to lower tax rates on capital gains, revealed the survey.
Furthermore, Rs9.1 billion worth of tax was waived on income from various funds and educational institutions that were collecting hefty fee from the students.
Sales tax exemptions that stood at Rs24.3 billion last year, rose to Rs37.5 billion this time around, mainly because of partial tax breaks given to the influential sugar industry.
Sales tax exemptions grew 54% over the previous year. Sugar industry was exempted from paying Rs12 billion sales tax during the period under review.
On sale of tractors, exemptions of Rs2.1 billion were granted. On sale of pharmaceutical products, Rs7.1 billion tax was exempted. In the “others” category, taxes worth Rs16.2 billion were waived.
Customs duties exemptions stood at Rs119.7 billion, showing an increase of Rs7.5 billion or 6.6%. Most of the tax breaks were given to the oil, automobile and textile sectors.
The largest exemption, Rs28.2 billion, was given under the head of general and conditional exemptions that raises questions of transparency as there was no explanation pertaining to these conditional exemptions.
An amount of Rs18.5 billion was waived in favour of the automotive sector. In addition to that, Rs11.1 billion was waived in favour of vendors of the automobile sector.
Duties worth Rs9.2 billion were written off on account of raw material imports. The government also exempted Rs22 billion worth of duties on imports from China, while the national exchequer suffered a loss of Rs2.8 billion due to concessionary imports from Malaysia.
Finance Minister Ishaq Dar said "such a low tax base was a shame for the country", , said while unveiling the survey on Tuesday.
The declining revenues led to massive borrowings to meet soaring expenditures, increasing the country’s debt burden significantly.
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