The government has decided to phase out tax exemptions for new Special Economic Zones (SEZs) as part of ongoing IMF-mandated reforms, with the move aimed at enhancing the country’s tax collection system.
Minister for Finance and Revenue Muhammad Aurangzeb told the National Assembly’s Standing Committee on Finance that tax exemptions are not economically sustainable. The SEZs already enjoying them were not as productive as per the desired results.
Federal Board of Revenue (FBR) Chairman Rashid Langrial confirmed that the government would no longer offer tax exemptions to new SEZs under the latest round of reforms.Â
While the IMF had initially aimed to scrap all exemptions by 2027, the FBR chairman said that they successfully negotiated an extension, with tax holidays for existing SEZs set to end by 2035.
The committee members raised serious concerns over the move, while saying that it would discourage the local and foreign investors and not a single dollar investment would be brought to these zones. However, the committee gave its nod after it was told that it was an IMF benchmark and needed to be fulfilled.
The standing committee also approved another IMF-supported proposal to remove the distinction between Table-I and II, making all Non-Profit Organizations (NPOs) subject to standard compliance requirements to qualify for 100% tax credit.Â
This move aims to enhance oversight, minimize the misuse of blanket exemptions, and align tax benefits with well-defined regulatory conditions, according to the FBR.
