The federal cabinet has given a go-ahead to the withdrawal of various income tax exemptions through a presidential ordinance rather than going through the usual parliamentary legislative process.
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The procedure for bringing the Presidential Ordinance has been completed and the approval of the Ordinance has been sought from the Federal Cabinet through a summary circulation. According to the government, the bill could not be presented in Parliament because of urgency.
Under the aforementioned ordinance called Tax Laws (Second Amendment) Ordinance, 2021 some 76 corporate income tax exemptions will be withdrawn.
The approval for withdrawing this tax of Rs. 140 billion in value is in line with the conditions for the new $500 million IMF funds that Pakistan is supposed to get.
The IMF board is reportedly scheduled to announce the release of the third portion of the fund on March 24. It had set various conditions for the government to meet to unlock the third tranche of a total $6 billion extended fund facility.
This Tax Laws (Second Amendment) Ordinance, 2021 would amend Sales Tax Act 1990 and Income Tax Ordinance 2001. After it is signed by the president, the Ordinance will come into force promptly.
Through the Tax Laws (Second Amendment) Ordinance, 2021, the corporate income tax exemptions would be withdrawn and replaced with the tax credit regime. The tax credit facility has been granted to industrial undertakings, charitable organizations, and IT export services under the Ordinance.
Similarly, recently, an amendment in the constitution of the State Bank of Pakistan came under heavy criticism because the government had chosen to avoid the National Assembly due to urgency. Under the SBP amendment, primary and tertiary objectives of the central bank were revised to grant the bank more autonomy.
People are arguing that although this will be something that fills the government’s tax bucket, at the same time consumer welfare is being compromised.
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Originally, the date of withdrawal was set for the 1st of July, the international lender pushed for an earlier date, leading to the government using the ordinance to pass the amendment.