ISLAMABAD, June 12: The government has withdrawn 30 income tax exemptions in various sectors to meet the target of Rs477 billion income tax set for the 2008-09 fiscal year.

The increase in income tax collection during the past eight years was said to have been made mostly due to withdrawal of around 100 income tax exemptions as part of IMF’s conditionalities under the Poverty Reduction and Growth Facility (PRGF) programme.

Though Pakistan has no arrangement now with the IMF, but the committee on reforms of the Income Tax Ordinance had recommended to the Federal Board of Revenue (FBR) to withdraw almost all exemptions with a few exceptions.

The last government had withdrawn 55 exemptions in 2002-03; 20 in 2003-04; 10 in 2004-05 and the remaining over the past few years.

The exemptions withdrawn through the Finance Bill 2008 include those provided to salary received by a non-resident employed by the Shaukat Khanum Memorial Hospital and Research Center, Lahore; on salary income received by a non-resident employed by the British Council; on income received by a person from an annuity or annuities issued by the State Life Insurance Corporation of Pakistan; exemption provided to donations made to the Liauqat National Hospital Association Karachi and the President’s Relief Fund for Earthquake Victims 2005 and to the second session of the World Islamic Economic Forum 2006.

It has been proposed to withdraw exemption to profit on debt of a foreign loan; exemption of profit on Islamic mode of financing on investment by a non-resident, to profit on special US dollar bonds; and profit on debt on the Pakistan rupee account or certificates.

The bill proposes to withdraw exemption to income of Pakistan Cricket Board; exemption on payment for supply of plant equipment etc to Hubco, income from transfer of membership rights or shares of stock exchange, and the income under ‘facilitation agreement’ between the president and taxpayer purchasing the Kot Addu power station.

The bill also proposes to withdraw exemption of reduced rate of tax of two per cent on import of raw materials for steel industry, poultry feed, stationery, energy saver lamps, edible oils, bitumen, fixed wireless terminal, pesticides and weedicides; to withdraw application of reduced rate of tax at the rate of 0.75 per cent on export of rice and fish.

It also proposes to withdraw reduced rate of tax on dividend from a company engaged in mining operations.

Also proposed in withdrawal of exemption of 80 per cent tax relief available to cigarette manufacturers; exemption on waiver of profit on debt; and minimum tax u/s 113 on turnover of various entities listed in clause (5) of part-IV of second schedule; and exemption of minimum tax u/s 113 and withholding tax on profit on debt to non-residents on receipts from Pakistan rupees denominated government and corporate securities and redeemable capital.

The bill proposes to withdraw exemption of withholding taxes on profit on debt and brokerage and commission, of a person making payments to the National Investment (Unit) Trust, mutual fund, REIT scheme or Asset Management Company; withholding tax on profit on debt accruing on special US dollar bonds; facility of tax-adjustability by a manufacturer who opts for presumptive tax regime; and withholding tax on payment made for supply of relief goods for earthquake victims against funds from the president’s relief fund shall be final tax liability.