PML-N gives new lease of life to tax exemptions

E-Paper | August 11, 2026

PML-N gives new lease of life to tax exemptions

Mubarak Zeb Khan Published April 27, 2014

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ISLAMABAD: Like previous governments, the PML-N government has promoted the culture of tax exemptions and issued over 80 orders to reportedly benefit influential people in the first nine months (July to March) of the current financial year.

Soon after coming to power, the PML-N government had constituted a committee to review implications of the statutory regulatory orders (SROs) issued by the previous governments.

A study carried out by the government has revealed that yearly tax exemptions amount to Rs478 billion — nearly two per cent of the gross domestic product.

Several meetings chaired by finance minister have been held to review the study and identify concessions and exemptions which could be rationalised, simplified and minimised in or removed from the budget for 2014-15. But an official source said that influential lobbies were not ready to pay taxes and insisted on availing the exemptions.

The present government has so far issued eight SROs for customs duty exemption. A customs official said the revenue loss caused by incentives given to motorcycle manufacturers was yet to be calculated.

The government has issued 24 SROs for granting income tax exemption. Seven of them directly involve tax exemption of millions. The government has extended some of the income tax exemptions through SRO669(I)/2013 (amendment in second schedule of income tax); SRO739(I)/2013, SRO772(I)/2013, SRO799(I)/2013 and SRO828(I)/2013 (Different tax returns); SRO900(I)2013 (rate of income tax reduced for goods transport); SRO904(I)/2013 (rules for collection of income support levy); SRO978(I)/2013 (exemption from filing of wealth statement; SRO980(I)/2013 (rate of tax for passenger transport vehicles); SRO1040(I)/2013 (immunity from audit for tax year 2013); SRO1035(I)/2013 (rules for banking companies reporting); SRO1065(I)2013 (incentives for industrial undertaking); SRO1064(I)/2013 (rate of duty reduced for goods transport) and SRO17(I)/2014 (partial exemption on fee paid to educational institutions).

It issued SROs to grant one per cent further sales tax exemption. These are (SRO648 (I)/2013, change of mode of collection to production capacity basis from aerated water (SRO649 (I) 2013); reducing of sales tax from 17 percent to 5 percent on finished products of textile and leather products (SRO682 (I) 2013); reduction of tax rates on touch mobile phones (SRO740(I)/2013); and sales tax rate reduced from 17 pc to 1 pc in cases of purchases made from unregistered persons (SRO897(I) 2013).

SRO1072 was issued to charge federal excise duty at the rate of 0.5pc as against the applicable rate of 8pc on local sale of sugar to benefit a handful of political families which owned sugar mills. The concession is in addition to Rs12bn-Rs20bn sales tax exemption.

Preferential trade agreements signed with other countries in the recent past also caused huge revenue losses because they were not properly negotiated to safeguard the country’s interests.

According to an official of the customs department, just one SRO issued for the implementation of a preferential trade agreement with Indonesia is likely to cause a loss of Rs3.5bn to the exchequer.

Customs duty exemptions were granted through SRO687(I)/2013 (procedural changes); SRO742(I)2013 (regulatory duty imposed on sport utility vehicles); SRO939(I)/2013 and SRO940(I)/2013 (reduced customs duty for new entrants in motorcycles manufacturing industry); SRO1 073(I)/2013 (amendment in existing Safta).

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Pakistan

Mubarak Zeb Khan is a senior staff correspondent for Dawn, bringing over two decades of experience to his coverage of political economy, trade, taxation, and public finance. He is a former Innovation Journalism fellow at Stanford University and a Chevening Scholar. He tweets @mubarakzebdawn.

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Omer

Apr 27, 2014 07:59am

The govt is trying to eliminate poor, instead of poverty, by extending unprecedented concessions to the already "Haves" through SROs instead of bringing them under the tax nets while fleecing the "Have-nots" by eliminating subsidies.

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Tariq Ali

Apr 27, 2014 10:47am

In a country surviving on handouts from other countries, the World bank and IMF, every Citizen should help carry the financial burden. These tax exemptions do not benefit the country only the people who supported the politicians in power. It would be interesting if any of these can be economically justified.

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M Rafique

Apr 27, 2014 12:12pm

Names of the beneficiaries are missing, consciously or otherwise

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Rizwan

Apr 27, 2014 01:14pm

Has anybody ever thought of those who have been paying tax consistently for many years. No loyalty reward for them? Why rebates and incentives are always offered to defaulters? Is there any policy on defaulters? for example ssgc offering rebate to its defaulters, cell operators offering free minutes to unused sims and fbr offering schemes to its defaulters. Is there any law by virtue of which such offerings are allowed in our society Unfortunately honesty is always punished in this country

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Parvez

Apr 27, 2014 01:44pm

This is how Nawaz, Zardari and the rest who make up a few thousand in this god-forsaken country were made...........so no surprises here.

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Naji Nutkani

Apr 27, 2014 03:28pm

they are simply doing in response which they have promised before election for their support by powerful industrialist and business class....hats off Dar shb...u have done which the common man of this country was expecting....we are really proud of you..only a businessman can protect the interest of other businessman....this will finally decrease the gap b/w have and have nots...finally at the end of day there will be no have not in the country...:(

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Syed Imtiaz Abbas Hussain

Apr 27, 2014 04:20pm

Nawaz Government always found better than PPP Government, which is confirmed by International organizations and which is also evidenced by the fact that Direct Foreign Investment (DFI) has shoot up many folds under the present Government as economic indicators are positive. Nawaz belongs to a religious and industrial family so knows how to run economy. Corruption , drugs, looting etc are not his baby which is an undoubted fact. Pakistan may prosper if he re-visited his and his team leadership and competence level and to avoid attitude of taking personal vendetta. Providing exemptions, concessions, benefits and relief in tax etc does not mean Nawaz is favoring someone, but it is required under the doctrine of Cost benefit Concepts of economy. Such steps give benefits to the nation by boosting economy, growth in Industrialization and exports, increase in GDP, GNP, education and health and other community investment, reduce imports, inflation and unemployment , strengthen security, develop infrastructure etc. Further Pakistan must also encourages foreigners and overseas Pakistanis to invest in Pakistan. Eliminate by iron hands, the menace of leakages, wastage, evasion, malpractice and maladministration in resources and taxes then I am confident that our black economy will be converted into white economy and there will be no alleged / political shortfall in any area. Apart from these advantages, other economic benefits one can avail in Pakistan includes: availability of skilled and cheap labour, high rate of return on investments and savings, relaxed foreign exchange rules, low rate accommodations, cheap food, rich mineral deposits and government extra-care for foreigners etc.

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Amir Mahmood

Apr 27, 2014 06:18pm

Previous government has given subsidies of Rs 478 billion, the current govt will definitely break the record. They are basically subsidizing themselves.

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javed dost kalhoro

Apr 27, 2014 06:40pm

Who are these influential. All knitted to Nawaz and Shahbaz.

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Saeed

Apr 27, 2014 06:43pm

Why tax exemption for rich? May be because rich rule us.

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Khalid

Apr 27, 2014 08:16pm

@Syed Imtiaz Abbas Hussain Of course. Pakistan should incourage foreigners but Nawaz Sharif should start this by asking his relatives to bring all their businesses and the foreign exchange back to Pakistan. Only then, we can ask foreigners and overseas Pakistanis to follow. Your one sided analysis of Nawaz Sharif's character and his track record just doesn't wash with what has been written in this article. Perhaps you need to be a bit more objective in your praise for Nawaz Sharif.

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FNK

Apr 27, 2014 08:31pm

Business man Prime Minister is a true friend of business men, I am not talking about small shop keepers. Exemptions benefit the importers, exporters and industrialists. Who cares if treasury can lose billions.

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Feroze KN

Apr 27, 2014 08:36pm

Brought in power by moneyed class, himself many times a billionaire with undeclared assets in the country & outside the country,why should PM Nawaz Sharif care if treasury is losing the money. They all do, leave the country when things get rough, come back when things work in their favour.

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Last Word

Apr 27, 2014 11:02pm

This move may not please IMF and countries giving aid to Pakistan. Just await their reaction.

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Salahuddin

Apr 28, 2014 12:32am

I am an employ of federal government and tax from my pay has already been deducted which amounts just over two hundred rupees for the year 2012-13. Few weeks ago I received a letter from fbr to submit my tax return immediately r face repercussions. I registered with fbr and submitted my return. It is hilarious that big fishes get immunity and poor workers are being intimidated to complete file works after submitting their taxes.

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K.A.Muhammad

Apr 28, 2014 04:31am

@Syed Imtiaz Abbas Hussain, whilst people of Pakistan are fed-up with shortage of Electricity, Water and Gas Supply added with Death and Destruction all around over the years are out to dispose off their existing business and ready to leave the country at the first available opportunity; your analysis on Government's economic policies is beyond comprehension of most of the Pakistanis; especially the business community. Anyway, please read the comments as follows made by none other than Pakistanis.

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Bilal

Apr 28, 2014 06:03pm

Exempting oneself means putting burden on the shoulders of the weak. Pakistan is being run by the weak & poor facing all tax enforcement since its evolution. Pakistan's history is a witness that implementation of any new tax or revision of any tax already implemented never solved financial issues. Rather Pakistan goes towards a worse financial scenario. Unless the ruling/investor/elite class doesn't pay taxes as due on them Pakistan can never move ahead towards prosperity. 3 million tax thieves in FBR record need to pay taxes. Otherwise Pakistan's existence is a miracle.

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