Courtesy PID
Promulgation of Tax Laws Amendment Ordinance, 2021 and NEPRA Act (Amendment) Ordinance, 2021 aimed at withdrawing tax exemptions, granting NEPRA autonomy
President Arif Alvi on Thursday issued two ordinances that were reportedly a precondition of the International Monetary Fund (IMF) for restoring the Extended Fund Facility and approving the release of a $500 million tranche.
The Tax Laws Amendment Ordinance, 2021 introduces over 75 amendments to Pakistan’s tax laws and comes into effect “immediately.” In addition to fining people who hide their sources of income with 50 percent of their due tax, it says that shop owners who don’t display their national tax numbers in their shopfronts would be fined Rs. 5,000. It also calls for a Rs. 5,000 fine for anyone who doesn’t file their tax returns or wealth statements.
Under the ordinance, the government has withdrawn tax exemptions for fresh graduates, investment companies and the film industry. It ends blanket exemptions for non-profit organizations, adding that they would be given tax credits based on compliance level. However, exemptions granted to Shaukat Khanum Memorial Trust, Sharif Trust, and Alamgir Welfare Trust have been maintained. In total, around Rs. 140 billion in exemptions have been withdrawn, though 62 sectors have been granted a tax credit facility
The ordinance also calls for withdrawing tax exemptions on the Installation of new oil refineries from Dec. 31, 2021, and has imposed income tax on private power plants from July 1, 2021. Houses being built under the Naya Pakistan Housing Program will retain tax exemptions until June 2024.
NEPRA autonomy
Under The National Electric Power Regulatory Authority (NEPRA) Act (Amendment) Ordinance, 2021, the federal government now has the power to increase surcharges by up to 10 percent and increase electricity tariffs. It allows the government to charge up to Rs. 1.40 per unit, and increase it further by up to Rs. 5.5 per unit in the next two years. The surcharges will add an additional burden of Rs. 150 billion on consumers.
According to sources within the government, the new rates would help the country resolve the circular debt. The new ordinance also grants NEPRA autonomy to set electricity prices in accordance with global fuel prices without having to wait for approval from the federal cabinet.