Tax exemptions jump to record Rs1.75 trillion in FY22

ISLAMABAD: Tax exemptions and concessions given to businesses and individual in the ongoing fiscal year 2021-22 make up 1.75 trillion against Rs1.31 trillion estimated in the last fiscal year, Economic Survey 2021-22 showed on Thursday.

Tax exemption costed 442.7 billion more in the ongoing fiscal year. The government, however, did not share specific details of revenue loss on account of tax credits for charitable donations, a tax credit under Section 100C, and revenue loss on account of tax credit for investment in shares and insurance under Section 62 of the Income Tax Ordinance.

The tax loss on account of Income Tax exemptions stood at Rs399.6 billion in FY2021-22 against estimated losses of Rs448 billion in the last fiscal year. The Survey also did not mention revenue loss on account of exempt business income granted to independent power producers (IPPs). Similarly, there is no details of revenue loss from capital gains.

The revenue loss on account of tax credits amounted to Rs65.465 billion in 2021-22 against Rs105.342 billion in 2020-21, showing a decrease of 38 percent. There is a significant decrease in the cost of income tax exemption on account of tax credits to the tune of Rs39.877 billion in FY2021-22.

The FBR faced a revenue loss of Rs760.543 billion in 2021-22 mainly because of sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. Last year, the revenue loss stood at Rs329.942 billion.

The FBR has suffered a loss of around Rs191 billion due to sales tax exemptions available under the Eight schedule (Conditional Exemption) of the Sales Tax Act, 1990 in 2021-22 against Rs208 billion in 2020-21. The revenue loss from conditional exemptions has been decreased by Rs17 billion.

The exemption of sales tax on cellular mobile phones under the Ninth Schedule of the Sales Tax Act, 1990, resulted in a revenue loss of Rs49.891 billion during 2021-22 against Rs27.096 billion during 2020-21, reflecting an increase of 84 percent.

The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs11.367 billion in 2021-22 against Rs12.887 billion in the last fiscal year.

The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs15.963 billion during 2021-22 against Rs12.645 billion in 2020-21, reflecting an increase of 26 percent.

The concessions under the Fifth Schedule of the Customs Act, 1969 caused a revenue loss of Rs168.754 billion in 2021-22 as compared to Rs137.418 billion in 2020-21, reflecting an increase of 23 percent. The FBR has suffered a massive revenue loss of Rs46.105 billion during 2021-22 against Rs34.210 billion in 2020-21 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs).

Similarly, exemption of customs duty on the items imported by automobile sector, exploration and production (E&P) companies, and CPEC caused a loss of Rs60.987 billion in 2021-22 against Rs55.877 billion during 2020-21, showing an increase of 9 percent.