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  • Service: Tax
  • Type: Business and industry issue
  • Date: 1/23/2014

Pakistan – New tax policy aims to promote economic growth 

To stimulate Pakistan’s struggling economy and encourage growth, the Prime Minister of Pakistan announced a tax incentive and amnesty package on 28 November 2013. Pakistan’s economy has seen a period of negative growth, and resources are needed to set the country back on track towards progress and prosperity. The new policy aims to broaden the tax base and attract investment in much-needed new projects.

This package is one of the most significant government initiatives to be introduced since the Prime Minister assumed the office in May 2013. The Prime Minister has also set up a “Prime Minister’s Business Advisory Council”, which will meet quarterly to discuss how to implement economic policy decisions. While implementation details of the new policy are still being developed, this article outlines the highlights of interest to foreign investors.

Industrial growth

An attractive incentive program is introduced for investments in new industries in:


  • “Green field” industrial and expansion projects (i.e., involving the construction of facilities where none previously existed)
  • Captive power plants
  • Low-cost housing
  • Construction
  • Livestock
  • Mining and quarrying in the Thar coal project
  • Mining projects in the provinces of Balochistan and Khyber Pakhtunkhwa.

For investors who set up an industry in these sectors on or after 1 January 2014, there would be no scrutiny of the source of investment, subject to illicit funds scrutiny discussed below.


The government has clarified that these incentives are not available to certain sectors that are overcrowded with existing operations or are considered anti-social. These sectors include arms and ammunition, explosives, fertilizers, sugar, cigarettes, aerated beverages, cement, textile spinning units, flour mills, and vegetable ghee and cooking oil. Moreover, the incentives are subject to the laws that regulate illicit funds under Pakistan’s Narcotic Act, Anti-Terrorist Act and Anti-Money Laundering Act.

Tax incentives

Significant new tax incentives are as follows:


  • Individual taxpayers who have not filed income tax returns during the last five years will be exempt from penalties, default surcharges and audits if they file their returns together with a payment of 20,000 Pakistani rupees (PKR) for each year defaulted.
  • Persons not holding a National Tax Number will be granted immunity from tax audits, penalties and default surcharge if they voluntarily file their income tax returns together with a payment of PKR 25,000 per year, for as many years as they want.
  • Existing taxpayers would be immune from computerized selection for tax audit if they pay 25 percent more tax for the current tax year than for the preceding year (e.g., if they pay 25 percent more tax for the 2013 tax year than they paid or were assessed for the 2012 tax year).
  • The government will issue privilege cards to taxpayers in the following categories:
    • CEOs of companies
    • Main shareholders of associations of persons (e.g., registered and unregistered partnership firms)
    • High tax-paying salaried and non-salaried individuals.

    The cards will entitle holders to the use of VIP lounges at airports, fast-tracked clearance at immigration counters, free passports and increased baggage allowance.

  • Excellence awards shall be given to taxpayers in each of the above categories. Award-winners will be invited to an annual excellence awards ceremony dinner with the Prime Minister and to Pakistan’s official National Day and Independence Day ceremonies.
 

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