Tax exemptions for the powerful

FBR chief recently hinted that the income tax exemptions available to the VIPs will not be removed.

Tax exemptions granted to the high and mighty are one — but certainly not the only — reason why the public purse remains so lean and thin. The very important persons (VIPs) of the land enjoy income tax exemptions on a large part of their salaries, unlike the ordinary mortals who have their gross salaries taxed. Clearly, this militates against the principle of equity which should govern the entire salaried class across the board.

A report in this paper notes that income tax on salaries of the president, provincial governors, services chiefs, corps commanders, Supreme Court and high court judges and federal ministers is charged by excluding expenses on conveyance, residence, entertainment, travel and allowances. The expenditure under these heads forms a significant part of their pay packet and its exclusion from taxation is enshrined under the Income Tax Ordinance of 2001. Another distortion which the government has chosen to conveniently gloss over is that all federal bureaucrats serving in Grade 20 to 22 are not only availing hefty car allowances but also using official cars as well. This defeats the very purpose of a monetisation scheme introduced by the government for the babus to stop the misuse of vehicles pool and fuel. Not only this, the monetisation allowance that the bureaucrats receive is separately charged by taking it out from gross salaries with a view to avoiding higher rate of income tax applied on those falling under higher income brackets.

With the new federal budget just round the corner, the authorities have an opportunity to right this wrong by withdrawing these tax immunities. But it is said that the Federal Board of Revenue (FBR) is not amenable to the idea and is resisting the proposal to this effect. Its chief recently dropped a broad hint that the income tax exemptions available to the VIPs will not be removed. He told a Senate panel that of the Rs480 billion tax exemptions, only half could be withdrawn since the rest are protected under the law and the Constitution. This begs the question: can’t the government amend laws and the Constitution to end the patent discrimination that tax exemptions represent?

Published in The Express Tribune, May 21^st, 2014.

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