Pakistan’s tax landscape has undergone a significant shift with the withdrawal of several previously available exemptions and tax credits. This move aims to boost government revenue and promote fiscal responsibility, but it also represents a change in how some businesses and individuals will operate. Let’s delve into the specifics of these changes:
Education and Employment:
- Fresh Graduate Incentive Removed: Employers can no longer claim tax credit for hiring fresh graduates, potentially affecting employment opportunities for young professionals.
Asset Depreciation:
- Generous Depreciation Allowance Gone: The special 90% depreciation allowance on specific assets is abolished, impacting businesses that invested based on this incentive.
Market Growth:
- Stock Exchange Enlistment Credit Scrapped: Tax credit for listing on a registered stock exchange is discontinued, possibly discouraging new listings and hindering market expansion.
Industrial Development:
- Emerging Industries Lose Support: Specific tax credits for newly established industrial undertakings are withdrawn, potentially slowing down the growth of emerging sectors.
Natural Resources:
- Refinery & Mining Link Severed: Exemption for refining and concentrating businesses linked with mineral exploration is no longer applicable, potentially impacting resource development partnerships.
Oil & Gas Exploration:
- Sweetheart Deals Expire: Certain concessions, including full depreciation deductions for underground installations, are revoked for oil and gas exploration companies, likely increasing their operational costs.
Finance and Investments:
Interest on Foreign Loans Taxed: Profits accruing from debt owed to non-residents are now subject to taxation, affecting borrowing options for some businesses.
Mutual Fund Distributions No Longer Sheltered: Distributions from specific collective investment schemes are brought under the tax net, impacting potential returns for investors.
Technology Sector:
Mobile Phone Manufacturing Credit Cancelled: The 100% tax credit regime for mobile phone manufacturing is removed, potentially affecting domestic production and investment in this sector.
Software Exports: A New Deal: The full tax credit for IT exports is replaced with a reduced withholding tax for qualifying companies, offering a different incentive structure for this crucial industry.
