Tax exemptions to the affluent segment of society nearly double. CREATIVE COMMONS
The first thorough study of tax exemptions, carried at the behest of the International Monetary Fund, showed the actual cost of tax concessions industrialists have been enjoying over the years but the Federal Board of Revenue chose not to bring the findings to light.
The findings of the study have now been published in the Economic Survey of Pakistan 2013-14. Earlier, the FBR used to give nominal amounts of sales tax exemptions, which have now been disclosed to a large extent.
According to the Economic Survey of Pakistan 2013-14, tax exemptions given in the outgoing fiscal year were Rs237.5 billion or 99.3% higher than the preceding year. In the last fiscal year, the government had estimated the cost of exemptions at Rs239.5 billion.
More than half of the exemptions were given in sales tax during the outgoing fiscal year. The share of sales tax exemptions was 15.7% in the total exemptions in the previous fiscal, showed the Economic Survey.
“The cross-section discussions have been completed and the government is going to withdraw a significant part of the exemptions in the new budget,” said Finance Minister Ishaq Dar while addressing the media at the launch of Economic Survey.
When asked about alleged resistance against the removal of exemptions by members of the influential textile industry, Dar said the government is simply trying to take consult stakeholders of the sector.
Huge exemptions coupled with rampant corruption in the Federal Board of Revenue kept the country’s tax-to-GDP at almost last year’s level.
Sales tax exemptions that stood at Rs37.5 billion last year, rose by 564% to Rs249 billion this time around after the FBR for the first time brought on record the tax exemptions enjoyed by many well-connected sectors of the economy.
Out of Rs249 billion, an amount of Rs94 billion was lost due to exemptions given to many industries under Statutory Regulatory Order 549 of 2008.
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@Ch. Allah Daad: I pity your naivity. I appreciate that you are a loyal supporter of PML-N but this is the same blind loyalty that has destroyed Pakistan. It is upto the extent where people have degraded themselves as herds of sheep who would just blindly follow the master without questioning right or wrong. Following without intellect is slavery.
Providing tax breaks to rich and increasing tax on the rest to cover government expense just shows government's inability to reform the tax system. Go travel the world with eyes open, it is the middle class that drives the economy not the top businessmen who are given tax breaks out of fear that they may move out. This givernment is destroying the economic base just to appease their financers and their own businesses.
@Ch. Allah Daad:
Even with this sort of incentive which never happens in any developed countries in the world.....comparing last fiscal year earning 2012-2013 was Rs 1685 billion while in 2013-2014 it is Rs 1656 billion.....a shortfall of Rs 29 billion. Beside, this amount of tax exemption could have been diverted to energy sector, education & health which was only 2% & not shown in the survey presented by Mr Dar....no wonder this govt has proved that it came with the full support of the elite & the industrialists...Ok, let us for arguments sake accept your argument....why the elite & industrialist class not agreeing to increase in tax, do not file tax returns & yet enjoys SROs, involved in electricity thefts, does not pay back the with-holding taxes into the govt account, use all kind of tact to under invoice import / over invoice export then seek export incentives on fake invoices...& the list is long......look / observe the way these rich / the elite & industrialist class live & their lifestyle, yet compare the taxes they pay ? if these rich people have an iota of patriotism like Mr Harari ( ex PM of Lebanon ) who donated $ 3 billion in the 80s to Lebanon govt when civil war ended...today these people cud claim the right to seek benefits as compensation & we did not need to beg.....we could have given them same rate of return as we give to any international financial institutions with conditions that it would not be repatriated out. This would ensure that the money remains in circulation in the country. We have a PM who is a billionaire & yet seeks IMF loans....not only the PM but many of the rich people as per Swiss bank report, have $200 billion in Swiss & offshore account. Imagine, if this money is brought back, do we need to beg ? We can pay back all the loans & yet have much left for our country`s development.
@Ch. Allah Daad: In Pakistan, rich are rich because they support corruption. I've seen many average guys going extremely rich after they assimilated in the corruption system. They know how to distribute some money to make more money.
PML-N government is actually and basically business-minded and most of the PML-N's MNAs and MPAs are business related people this is why PML-N is doubling tax's applicable amount and sacrificing the poor and common man of Pakistan....
So Ch. Saab you reckon Pakistan to be an Industrual giant. Well i got news for you we are still an impovetished agri country and there are more people working in agriculture than industry. Somewhere along the line your education got neglected. @Ch. Allah Daad:
@instant... Wish somebody would actually read what you brilliantly pointed out. But then again, who cares about data or studies. Objective discussion goes right out of the window when blind devotion kicks in as is the case with Mr Allah Dad. I for one, thank you for increasing my knowledge. We probably need to experiment another 100 years for either the trickle down effect to start working or another 5 years completely losing whatever we have in the name of economic growth.
@Ch.Allah Daad The reason why many industrialists have moved on to other countries is poor law and order situation, unavailability of water, electricity, gas and manpower and not the tax system. If you give them tax exemptions and there's no transport available due to goods transporters strike or some political party strike can your business thrive? or you need to ship your goods but here's no electricity to run the looms or water to dye the fabric can you ship your order on time?
The point is that these industrialists should be taxed heavily and that money shall be used to provide better infrastructure, to strengthen institutions and to ensure availability of electricity, gas and water. Just because they create jobs doesn't mean that the common man shall pay the taxes and the rich can keep on accumulating more wealth.
@Ch. Allah Daad: What you are referring to is the Trickle down theory which has been debunked because it only benifits the rich
There is no rocket science type knowledge required for managing our economy. No doubt, when you elect industrialists - big land owners as PMs, Wazirs and MNAs, they will exempt themselves form tax and put the tax burden on common man. My country men/women have to wake up and need to vote for the common peoples (excluding sharifs, zardaris, gillanis, shaws, chaudaries, etc.) who will look after the common man.
Its less so the exemptions that hurt the country but the miss-application thereof. Take the case of property tax as an example. It has two parts (1) the property part (ie the square foot area of the property) and (2) the luxury part (the structure on it). If the officials only collected the property part of the taxes that would be a great step forward and could go a long way in redressing the tax shortage problem, All property owned by the govt should also be taxed since that is the only way to assure the collection machinery stays efficient, By making the taxes laws more transparent much can be achieved. But confused muddled mess of laws are a boon for a bureaucracy and their benefactors the rich,
Bank robbery is an initiative of amateurs. True professionals establish a bank......... Bertolt Brecht
@Dr. Abid Shah Mashwani: Rich are rich because they manage their money better than others and use incentives, tax credits and government benefits very wisely. If we don't give them incentives, they will move their money off shore in greener pastures. Please remember that money has no religion and no boundaries and one of the most sensitive things which humans have created.
This shows PMLN government is not for Pakistani people rather it is for few rich in the industrial fraternity.