Tax Expenditure
3
261 T ax Expen d it u r e A Note on Tax Expe nditure 20 11 -12 Estim ates of tax expe ndi tures a re being prepare d by FBR and reported in the Pakistan Economic Survey si nce last few yea rs as pa rt of the b udge t proce ss. The Tax Expe nditure f or the yea r 2011-12 works out to Rs. 185.496 billion. Details of Direct Ta x es ha v e been indica t ed fir st in the r epor t , followed by Sales Tax and Customs Duty. Federal Exci se Duty has not be en incl ude d du e to very restrictive bas e and exem ptions. Deta iled are as follows: I nco me Tax The cost of exemp t ions, exclusions, subs t rac t ions, de ductions, reba tes a nd credi t etc that cause loss of Direct Taxes revenue comes to Rs. 69.608 (billion) has been reflected in Table -1 below: Tab le -1 : I ncome Tax Exp e nd itu re fo r 2 0 1 0 -1 1 an d 2 0 1 1 -1 2 (Rs. in billion) S. No Tax Expe nditur e I te ms Estimated Re ve nue L oss 2010-11 2011-12 1. Pensions & Grat uity 0.087 0.171 2. I ncome from Fund s, Boards of Educa tion, Universities an d Com pute r Training Institute s e tc. 0.979 6.077 3 . Donations a nd Contri butions to Charita ble Organ izations 0.649 0.624 4. I nde pen de nt Power Producers 0.870 46.939 5 . I ncom e from ce rtain Trusts, Welfare a nd Cha rita ble Institutions and Non-Profit Organizations 1.360 0.205 6 . Profits on Deb t/interes t f rom governm e nt sec urities a nd certa in foreign currency accounts/books, profit on debt earned by certain non-resident individuals and institutions 0.049 1.461 7. Export of I nforma tion Tec hnology 0.724 0.822 8. Capita l Gains 21.840 2.108 9 . Other Sectors/ en terprise spe cific exe m ptions 19.950 11.201 To t al 46.508 69.608 Sales Tax Sales Tax exem ptions a re provi ded at the im port stag e and on domestic supp ly of goods an d services. Previously, Sales Tax exemptions were available on certain items including tractors, fertilizers & pesticides etc. However, the Federal governm en t rationali zed the se exemptions duri ng last year. From 15-03-2011 onwards, tractors, pes ticide s a nd ferti lizers ha ve be en m ade chargeable to Sales Tax, resulting in reduction in the cost of exem ptions. Ta x Ex p enditure in res p ect of Sales Tax is esti ma ted a t Rs . 24.300 billion for fiscal year 2011- 12. Deta ils ha ve be en worked out and are i ndi cate d in Table-2 below: Annex 2
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Transcript of Tax Expenditure
261
Tax Expenditure
A Note on Tax Expenditure 2011-12
Estimates of tax expenditures are being preparedby FBR and reported in the Pakistan EconomicSurvey since last few years as part of the budgetprocess. The Tax Expenditure for the year 2011-12works out to Rs. 185.496 billion. Details of Direct
Taxes have been indicated first in the report,followed by Sales Tax and Customs Duty. Federal
Excise Duty has not been included due to veryrestrictive base and exemptions. Detailed are asfollows:
Income Tax
The cost of exemptions, exclusions, substractions,deductions, rebates and credit etc that cause loss of Direct Taxes revenue comes to Rs. 69.608 (billion)has been reflected in Table -1 below:
Table-1: Income Tax Expenditure for 2010-11 and 2011-12 (Rs. in billion)
S. No Tax Expenditure ItemsEstimated Revenue Loss2010-11 2011-12
1. Pensions & Gratuity 0.087 0.171 2. Income from Funds, Boards of Education, Universities and
Computer Training Institutes etc.0.979 6.077
3. Donations and Contributions to Charitable Organizations 0.649 0.6244. Independent Power Producers 0.870 46.9395. Income from certain Trusts, Welfare and Charitable Institutions
and Non-Profit Organizations1.360 0.205
6. Profits on Debt/interest from government securities and certainforeign currency accounts/books, profit on debt earned by certainnon-resident individuals and institutions
0.049 1.461
7. Export of Information Technology 0.724 0.8228. Capital Gains 21.840 2.1089. Other Sectors/enterprise specific exemptions 19.950 11.201
Total 46.508 69.608
Sales Tax
Sales Tax exemptions are provided at the importstage and on domestic supply of goods andservices. Previously, Sales Tax exemptions wereavailable on certain items including tractors,fertilizers & pesticides etc. However, the Federalgovernment rationalized these exemptions duringlast year. From 15-03-2011 onwards, tractors,pesticides and fertilizers have been made
chargeable to Sales Tax, resulting in reduction inthe cost of exemptions.
Tax Expenditure in respect of Sales Tax isestimated at Rs. 24.300 billion for fiscal year 2011-12. Details have been worked out and are indicatedin Table-2 below:
Annex 2
Pakistan Economic Survey 2011-12
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Table-2: Tax Expenditure of Sales Tax for 2010-11 and 2011-12 (Rs. in billion)
S. No Sectors Estimated Revenue Loss2010-11 2011-12
1. Fertilizer 9.138 02. Tractors 6.489 4.2803. Pharmaceutical Products 5.505 5.8004. Others 12.630 14.220
Total: 33.762 24.300
Customs Duty
Under the Customs law, exemptions orconcessions are granted to goods that are importedinto Pakistan through SROs, special classificationin Chapter 99 of Pakistan Customs Tariff, and/or
through specific rate of tariff. On the basis of theseprovisions, the tax expenditure in respect of Customs Duty has been estimated at Rs. 91.588(billion) for 2011-12. The details are given in thefollowing Table-3:
Table-3: Tax Expenditure of Customs Duty for 2010-11 and 2011-12 (Rs. in billion)
SRO. No & date Tax Expenditure ItemsEstimated Revenue Loss
2010-11 2011-12558(I)/200401-07-2004
Concession of Customs Duty on goods imported from SAARCand ECO countries.
0.073 0.055
570(I)/200506-06-2005
Exemption from Customs Duty on imports from Sri Lanka0.148 0.196
1296(I)/200631-12-2005
Exemption from Customs Duty on imports from China0.031 0.0002
894(I)/200631-08-2006
Exemption from Customs Duty on imports from Iran under Pak-Iran PTA
0.004 0.0009
1274(I)/200629-12-2006
Exemption from Customs Duty on imports under SAFTAagreement
0.116 0.151
659(I)/200730-06-2007
Exemption from Customs Duty on imports from China10.867 13.762
1261(I)/200731-12-2007
Exemption from Customs Duty on imports fromMalaysia 2.895 2.750
565(I)/200605-06-2006
Conditional exemption of Customs Duty on import of rawmaterials and components etc. for manufacturers of differentsectors.
4.653 7.391
567(I)/200605-06-2006
General and conditional exemption of Customs Duty.30.277 21.830
678(I)/200412-06-2004
Exemption of Customs Duty and Sales Tax to Oil Explorationand Production (E&P) companies on import of machineryequipment & vehicles
2.581 2.810
575(I)/200605-06-2006
Exemption of Customs Duty and Sales Tax on import of machinery, equipment, apparatus and other items
13.712 9.833
655(I)/200622-06-2006
Exemption from Customs Duty for vendors of AutomotiveSector
9.315 12.851
656(I)/200622-06-2006
Exemption from Customs Duty for OEMs of Automotive Sector19.073 19.196
809(I)/200919-09-2009
Exemption from Customs Duty on import of machinery &equipment by Industrial units registered with Ministry of TextileIndustry
1.196 0.756
Total 94.941 91.588
Tax Expenditure
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Consolidated Summary
Based on the aforementioned estimates forindividual taxes, the overall tax expenditure for
2011-12 has been estimated to be around Rs.185.496 billion. The consolidated summary of thetax expenditure for fiscal year 2011-12 is given in
Table-4:
Table-4: Tax Expenditure of Federal Taxes for 2010-11 and 2011-12 (Rs. in billion)
S. No. Type of Tax Tax Expenditure2010-11 2011-12
1 Income Tax 46.508 69.6082 Sales Tax 33.762 24.3003 Customs Duty 94.941 91.588
Total 175.211 185.496
Note: The estimates for 2010-11 are for the full year while for the year 2011-12, they pertain to 10 months i.e.1.7.2011 to 30.4.2012.
