Govt decides to abolish tax exemptions for SEZs, STZs
At high tax rates, profit margins for sellers decrease, leaving them with options to pass on the burden to consumers, compromise on the quality of products, evade taxes or find cheaper illicit goods. photo: file
The Senate Standing Committee on Finance was informed on Thursday that the federal government has decided to abolish tax exemptions for Special Economic Zones (SEZs) and Special Technology Zones (STZs) in line with the IMF conditions.
During a meeting chaired by Senator Saleem Mandviwalla on Thursday, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial briefed the committee that under the IMF agreement, all tax exemptions must be phased out by 2035.
He stated that going forward, no SEZ or STZ will receive any form of tax relief. "Our hands are tied," Langrial remarked, adding that tax concessions and reduced rates across various sectors are being withdrawn.
The committee rejected budget proposals for the next fiscal year, including imposing a carbon levy of Rs2.50 per litre on petroleum products, removing the 10 per cent cap on the debt service surcharge for electricity consumers and introducing a levy on small vehicles. The senators termed these measures as burdensome for the public.
Regarding autonomous public-sector entities, Senator Anusha Rahman raised concerns about institutions holding vast investments despite minimal staffing.
She cited the example of the Evacuee Trust Property Board (ETPB), which she said is managed by only 12 people but has Rs13 billion invested. She questioned why such institutions are allowed to retain and invest their revenues and called for reforms or exemptions in the Public Finance Management Act (PFMA) if needed.
The officials replied that bodies such as Nadra, CDA, and Karachi Port Trust are allowed to invest their funds and earn profits, and they pay taxes on these earnings. However, the committee chairman said none of these institutions had actually paid taxes recently.
The officials briefed the committee that Nadra had paid a tax amounting to Rs8 billion during the last two years.
The FBR chief proposed amendments to the PFMA, but the committee opposed them, insisting that revenue from all government-owned bodies must be deposited into the Federal Consolidated Fund.
The Ministry of Finance stated that the proposed amendment would allow autonomous bodies to retain and spend their income independently, but Anusha Rahman strongly opposed it, demanding that such entities remain accountable to the national treasury and sought balance sheets of such institutions.
The committee also reviewed proposed changes to property taxation. According to FBR officials, the withholding tax on property sales valued at Rs100 million has been increased from 8 per cent to 9.5 per cent, while properties worth less than Rs100 million will be taxed at 8.5 per cent. For properties valued below Rs50 million, the rate will be 7.5 per cent.
Additionally, the Finance Bill 2025 includes stricter measures against non-filers. While the property purchase tax for non-filers has been reduced, the burden has shifted to sellers.
The committee approved a proposal to impose a 5 per cent tax on foreign online platforms.
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