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Published : 09 May 2025, 02:27 AM
The National Board of Revenue (NBR) will no longer have the authority to grant tax exemptions in the industrial sector under a new proposal aligned with International Monetary Fund (IMF) conditions.
The proposal, set to take effect on the first day of the fiscal year 2025-26, will transfer this authority to parliament.
If parliament is not in session, the president will assume the power to approve such waivers.
The move has been outlined in the “Tax Expenditure Policy and its Management Framework”, published by the NBR on Wednesday.
The revenue authority has also said it will take steps to incorporate relevant provisions into the Finance Bill to give the framework legal backing.
Officials said since the parliament is currently inactive, the interim government would move to issue the changes through ordinances by incorporating them into “existing tax laws”.
For years, economists have criticised NBR policymakers for allegedly approving tax exemptions based on “personal or group interests”.
As part of the ongoing $4.7 billion IMF loan programme, the NBR has been asked to assess the amount of tax expenditure—exemptions, waivers, and reductions—it has granted.
The framework has been proposed in response to this condition.
Based on the directive, the NBR analysed tax expenditures from previous fiscal years and has now published a comprehensive policy and management framework, proposing it take effect from Jul 1.
The draft policy clearly says all powers currently granted to the NBR under the Income Tax Act, Value-Added Tax and Supplementary Duty Act, and the Customs Act will be rescinded.
From now on, all decisions on tax expenditures must be made by parliament during the annual national budget process.
If parliament is dissolved or not in session, the authority will be vested in the president.
The policy, however, notes that in cases of “urgent” public interest—such as essential commodities or matters of national importance—the finance minister or finance advisor may temporarily approve tax expenditures with approval from the cabinet or Advisory Council.
Any tax expenditure approved in this manner will not be valid beyond the final day of the fiscal year in which it was issued, the policy stipulates.
If an exemption needs to remain in effect beyond that fiscal year, it must be reapproved by parliament.
The policy also proposes that all ongoing tax expenditure orders or circulars—especially those without a specified expiry date—must be presented to parliament by Jun 30, 2026, for approval by the finance ministry.
Parliament will then decide whether to approve, amend, extend, or repeal these tax expenditures.
In addition, the policy mandates that each year, the finance minister or finance advisor will present an annual tax expenditure report to parliament.
This report will include a detailed breakdown of all exemptions and will evaluate the impact of at least one-fifth of them each year, ensuring that each exemption is assessed at least once every five years.
The findings will be made public.
