ISLAMABAD (March 05 2003) : The Central Board of Revenue (CBR) would take formal approval from the newly elected parliament to abolish 55 important income tax exemptions in the coming budget for 2003-04, official sources told Business Recorder here on Tuesday.
As per Income Tax Ordinance 2001, it is mandatory for CBR to take prior approval from the National Assembly for making any amendment in the Second Schedule of the said Ordinance.
The Second Schedule of the Ordinance 2001 covers exemptions and tax concessions including exemption from total income, reduction in tax rates, reduction in tax liability and exemption from specific provisions.
The new Finance Ordinance 2003 would notify the subject exemptions.
The tax authorities require approval of the National Assembly for adding any clause or condition; omitting any clause or condition and making any change in any clause or condition of the Second Schedule of the Income Tax Ordinance 2001.
Sources said that the withdrawal of income tax exemptions would be one of the toughest decisions to be taken by the new government to strengthen economic reforms agenda.
However, it is difficult to figure out the exact amount of huge revenue impact as under income tax law, the persons enjoying exemptions are not required to submit the details of the exempted amount to CBR.
While interpreting the legal implications of withdrawing income tax exemptions, sources said, the doing away with exemption would mean that somebody would have to be taxed, which seems a difficult task for the concerned authorities.
The CBR and Ministry of Finance would work out the modalities to finalise the names of the exemptions to be withdrawn in budget under the IMF PRGF programme, sources added.
Under Section 53 of the Income Tax Ordinance, 2001; Exemptions and tax concessions in the Second Schedule.
(1) The income or classes of income, or persons or classes of persons specified in the Second Schedule shall be –
(a) exempt from tax under this Ordinance, subject to any conditions and to the extent specified therein;
(b) subject to tax under this Ordinance at such rates, which are less than the rates specified in the First Schedule, as are specified therein;
(c) allowed a reduction in tax liability under this Ordinance, subject to any conditions and to the extent specified therein; or
(d) exempted from the operation of any provision of this Ordinance, subject to any conditions and to the extent specified therein.
(2) The Federal Government may, from time to time, by notification in the official Gazette, make such amendment in the Second Schedule by –
(a) adding any clause or condition therein;
(b) omitting any clause or condition therein; or
(c) making any change in any clause or condition therein, as the Government may think fit, and all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued.
(3) The Federal Government shall place before the National Assembly all amendments made by it to the Second Schedule in a financial year.