KARACHI: The Federal Board of Revenue (FBR) has announced income tax exemption on profits and gains derived from an electric power generation project formed by the splitting up, or the reconstruction or reconstitution of an electric power generation business already in existence.
Earlier, the tax exemptions under Second Schedule of the Income Tax Ordinance, 2001 were available for new and independent electric power generation projects only.
The FBR through SRO 248(I)/2015 notified amendments in the Second Schedule of the Ordinance, which provides that profits and gains derived by a taxpayer from an electric power generation project setup in Pakistan on or after July 01, 1988 including those formed by the splitting up, or the reconstruction or the reconstitution of an electric power generation business already in existence will be exempted from tax.
It may be mentioned here the government has given firm commitment to the International Monetary Fund (IMF) that it will introduce legislation to permanently eliminate the tax exemptions and concessions through the Statutory Regulatory Orders (SROs).
The government has already announced at the start of current fiscal year that all SRO exemption will be gradually withdrawn within next three years.
The government is advised by the International Financial Institutions (IFIs) to end tax exemptions as it will help in enhancing revenue generation.
To increase tax compliance FBR is working on a number of measures including introducing electronic volume tracking of production in the manufacturing sector that will improve sales tax collection. FBR is also working on steps to temporarily close businesses, attach properties of tax offenders; and attach bank accounts of tax defaulters to withdraw the assessed tax liability directly from their accounts.
Most of the income tax exemptions are related to independent power producer (IPPs) which is estimated over Rs 50 billion.