The federal government has decided to abolish corporate income tax (CIT) exemption in compliance with International Monetary Fund (IMF) condition. The decision will be executed either via presidential ordinance or parliamentary bill.
An official told Media,
“We are exploring all available options, including the promulgation of a presidential ordinance or the laying of a bill before parliament, to abolish the corporate income tax exemption and fetch Rs150 billion to Rs200 billion. However, nothing is so far decided.”
Federal Board of Revenue (FBR) has confirmed the withdrawal of CIT exemptions from the Income Tax Ordinance 2001. However it is yet to be decided how many exemptions will be abolished following the approval of policymakers, they added.
The government hopes to satisfy IMF’s Executive Board before it sets about budgeting for 2021-22.
The government intends to show its seriousness by presenting a separate bill before parliament.
On the other hand, FBR believes it is not practical to pass a bill or an ordinance to achieve the goal rather it is more feasible for government to abolish the CIT via Finance Bill for 2021-22.
Though the IMF negotiators did not seem interested in the option, because it would make it a tougher task for them to convince their executive board to revive the stalled program for Pakistan.
Pakistani negotiators attempted to convince the IMF to reduce the FBR’s annual tax collection target from Rs4,963 billion to Rs4,550 billion.
Although, a decision on this has not been made yet but Pakistani officials are making last-minute efforts to persuade the IMF negotiators before they send their review report to the Executive Board.
The IMF’s Resident Chief in Pakistan, Teresa Daban Sanchez, on Wednesday evening said,
“The authorities are committed to a fiscal strategy anchored by the sustainable primary deficit approved in the FY2021 budget. Remember that primary deficit is a key parameter under the extended financing facility supported program.”