ISLAMABAD: A high-powered committee has decided to withdraw tax exemptions worth Rs180 billion, or 0.5 per cent of gross domestic product (GDP), to bring down the budget deficit in 2015-16.

The committee, however, will submit a final report on the second phase of tax exemptions withdrawal on Thursday (today).

The meeting of the committee was presided over by Finance Minister Ishaq Dar to give final touches to the budget proposals.

The exemptions granted through SROs currently stand at Rs483bn. In the first phase, Rs105bn exemptions were withdrawn in budget 2014-15 by the committee.

The meeting reviewed performance of the committee established last year on regularisation of concessionary regime by the FBR, an official statement said.

The committee had detailed discussion on proposed measures regarding second phase of the plan for regularisation of concessions and exemptions (SROs) during the fiscal year 2015-16.

“Regularisation in the second phase would also similarly benefit the national exchequer,” finance minister was informed.

Dar asked the committee to take up work on withdrawal and regularisation of SROs with care, keeping in view the government’s objective to eliminate culture of extending favours to the privileged few.

The exemptions will also include upward increase in tariff on certain products as well as change in schedules, said an official source privy to the meeting, adding that the SRO

exemptions alone to be withdrawn in the budget 2015-16 will be slightly over Rs110bn by taking into account certain sensitive sectors which needed protection.

There are areas, like free trade agreements or preferential trade agreements, where the government has given tariff concessions to trading partners. Now, this issue can only be resolved through review of the existing treaties.

The FBR has already conducted a study on tax exemptions envisaging details of sector specific exemptions granted under SROs.

The report reveals that yearly tax exemptions enjoyed by industrialists, feudal lords and companies now amount to a staggering Rs480bn — nearly two per cent of the country’s GDP.

Pakistan’s tax system had been riddled with distortive and discriminatory exemptions and concessions had been granted to vested groups over a long period.

In the second phase of the plan, the official said, all residual concessions/ exemptions either in the SROs or Schedules shall be withdrawn in the upcoming budget except socially sensitive concessions.

Published in Dawn, May 28th, 2015

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