IMF Asks FBR To Abolish A Special Tax Regime For Construction

(CTN News) – A recommendation by the International Monetary Fund (IMF) has been made for the Federal Board of Revenue (FBR) to abolish the special tax regime for the construction sector.

On Thursday, sources told the Business Recorder that the IMF team and FBR high-ups discussed tax-related matters during the first meeting on the second review of the Stand-by Arrangement (SBA). On Thursday evening, the tax authorities and the Fund’s team met for an introductory meeting.

IMF and FBR meetings will continue Friday (15 March).

According to sources, the Fund has recommended that the special tax regime for the construction sector be phased out as soon as possible. The sector be subjected to the standard income tax regime.

The IMF also recommends removing the FBR and Cabinet from their discretionary powers to award tax incentives to industrial enterprises.

In the future, tax incentives should be time-bound and subject to regular assessments of costs and benefits. As soon as costs exceed expectations and/or benefits are lower than expected, incentives should be withdrawn, sources advised.

Furthermore, the IMF has recommended repealing the remaining exemptions from taxation for donations and non-profit organizations contained in the Second Schedule of the Income Tax Ordinance.

It has been recommended that the Fund review the charitable donations tax credit, as well as the credit for certain individuals, to ascertain whether changes to eligibility requirements would be beneficial.

Additionally, the Fund recommends expanding the remit and terms of reference of the National Tax Council (NTC) to include harmonisation of tax rates and the provision of agricultural income and property tax bases.

The federal government should encourage provinces to enforce their tax laws.

The IMF also recommended that a Tax Policy Unit be established within the Ministry of Finance, Revenue, and Economic Affairs.

It has also been recommended that memorandums of understanding and protocols be developed between the Fund and the FBR and other agencies for the purpose of exchanging data.

Business Recorder for Copyright 2024

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