Cabinet approves summary to cancel tax break to meet IMF conditions

The federal cabinet has approved a summary to immediately withdraw Rs140 billion worth of income tax exemptions to save the one-month-old staff-level agreement with the International Monetary Fund (IMF).

Sources told that the federal government, following the cabinet’s approval, will promulgate Tax Laws (Second Amendment) Ordinance 2021’ and the bill will not be tabled into the parliament due to lack of time.

Instead of July 1, as earlier announced by the Federal Board of Revenue chairman, these income tax exemptions will now be withdrawn with immediate effect.

In order to ensure a swift nod, Prime Minister Imran Khan had waived the requirement of first securing the approval of the Cabinet Committee on Legislative Cases (CCLC) before placing a legislative business-related summary before the cabinet for approval.

The withdrawal of Rs140 billion worth of income tax exemptions is a prior condition by the IMF to take Pakistan’s request to the Executive Board for approval of the next loan tranche on March 24. The IMF has not yet officially released the board meeting date due to a delay in implementing all the prior actions agreed between both the sides last month.

The IMF programme remains off track since January last year when the prime minister had refused to bring in a mini budget and increase electricity prices.

“The session of the (national) assembly has been prorogued and due to the urgency involved, the law is required to be promulgated through Presidential Ordinance,” the finance ministry requested the federal cabinet in its March 18 summary.

On March 9, the federal cabinet had approved the Income Tax (Second Amendment) Bill 2021 and allowed to lay it in the National Assembly as part of the IMF condition. However, now an ordinance will be promulgated by bypassing parliament and the name of the legal instrument has also been changed accordingly.