Leading Issues in the Economy of Pakistan: Agenda for Reforms Increase Progressivity of the Personal Income Tax: This will include, first, reduction in the number of rates and brackets from eleven to five and decreasing the size of the income slabs. Second, reduction in tax credits and allowances by 50 percent(except for Zakat and those provided for disabled and senior citizens). 6.2 Features of the Finance(Supplementary) Bill This bill has the primary focus on the sales tax reforms, while some changes are also proposed in the excise duty and income tax. The quantum of revenue loss currently in the sales tax system has been estimated for 2020-21 and is presented in Table 6.1. Table 6.1: Estimated Revenue Loss due to the Different Sales Tax Schedules, 2020-21 (Rs in Billion) Schedule Description Revenue Loss* 5 th Zero-rating 12.9 6 th Exemption on Imports 173.8 6 th Exemption on Local Supplies 156.1 8 th Reduced Rates 208.5 9 th Mobile Phones 27.1 TOTAL 578.4 *Source: FBR, Tax Expenditure Report, 2021. The revenue loss estimated by FBR is equivalent to 29 percent of the revenues actually collected from the sales tax in 2020-21. The Finance(Supplementary) Bill has proposed the following changes in the Schedules. Fifth Schedule: The following omissions: Serial No. Description 3 Supplies to Duty Free Shops and Diplomatic Supplies 6A Supplies of locally manufactured machinery to EPZ 15 Supplies to Exporters under EFS 18 Supplies to Ships TOTAL Revenue (Rs in Billion) 0.8 1.9 0.1 ­2.8 The revenue foregone in 2020-21 was marginal. 76