Promulgation of Presidential Ordinance for Tax Laws: Govt to seek approval from cabinet

ISLAMABAD: The government has decided to seek an approval from the federal cabinet for the promulgation of Presidential Ordinance for Tax Laws (amendments) Ordinance 2021 for withdrawal of corporate income tax exemptions with immediate effect. Earlier, the federal cabinet had granted its nod to Tax Laws (Amendment) bill 2021 but the government changed its strategy to promulgate an ordinance to this effect in order to satisfy the IMF’s Executive Board.

Now it can be confirmed with authority that the IMF’s Executive Board is not scheduled to consider Pakistan’s case in March 24 meeting and it might hold its meeting just ahead of the annual spring online meeting of IMF/World Bank.

When asked about changing its mind on the promulgation of ordinance instead of tabling a bill as decided earlier, a top official of the PTI-led government replied that the National Assembly was scheduled to meet with delay, so the government has decided to move ahead by promulgating an ordinance to this effect.

Now sources said that the IMF staff wanted to see clear-cut progress, so they forced the government to promulgate an ordinance so that the Fund’s Board could be satisfied.

With this background, the government changed its strategy in

order to satisfy the IMF Board with regard to the government’s seriousness for abolishing important tax exemptions.

The Presidential Ordinance would have immediate effect, but it would be ratified when converted into a Bill at the time of the federal budget (2021-22) through the Finance Bill 2021. Tax experts said that the ordinance would come into force at once. Through the Tax Laws (Second Amendment) Ordinance, 2021,

the corporate income tax exemptions could not be withdrawn from July 1, 2021.

The ordinance is being issued in case of any urgency like imposition of taxes with immediate effect. Legally, the drafters of the ordinance cannot write the applicability date of withdrawal of corporate income tax exemptions that would come into force from July 1, 2021.

Last week, the Federal Board of Revenue (FBR) Chairman Javed Ghani had told the media that all these measures of withdrawal of exemptions would be applicable from July 1, 2021. There would be no impact of these exemptions in the next 3-4 months.

The impact of the withdrawal of exemptions would be applicable during the whole next fiscal year, the chairman FBR said. He had stated that the government would withdraw corporate income tax exemptions within the range of Rs70bn to Rs140 billion.