Agenda of Federal Tax Reforms The Corporate Sector Contrary perhaps to perceptions, the corporate sector, both non-financial and financial, enjoys substantial tax benefits as shown in Table 9.4. In the former case, the total tax expenditure is projected at the high level of Rs 394 billion in 2020-21. This alone is equivalent to almost 1 percent of the non-agricultural GDP. Table 9.4: Tax Breaks and Concessions to the Corporate Sector[Non-Financial](Rs in Billion) Tax Breaks/ Concessions Magnitude of Tax Expenditure* 2020-21 1. Tax rate on Corporate Profits brought down to 29 percent 84 from 35 percent 2. Withdrawal of‘Super Tax’ 12 3. Tax Credit for Investment in BMR 59 4. Initial Depreciation Allowance 43 5. Lifetime Exemption from income tax to IPPs 74 6. Lower CIT on Foreign Investment and in Backward Areas 28 7. High level of tariff protection to some industries leading to 11 extra-ordinary profits 8. Lower sales tax rate on some industries 43 9. Lower PIT on exports 40 TOTAL 394 *Tax expenditure is the revenue loss due to tax break/concessions. Sources: Multiple This Includes the benefit of a significant reduction in the corporate income tax rate and the withdrawal of the‘super tax’. In addition, there is the tax expenditure associated with fiscal incentives given for investment, to foreign companies and for location in backward areas. The lifetime tax exemption of the IPPs implies a revenue loss of Rs 74 billion in 2020-21. Further, exporters enjoy a low PIT. The tax concessions and benefits granted to the financial sector, primarily commercial banks, are shown in Table 9.5. The total tax expenditure is Rs 74 billion, especially due to the big reduction in the corporate income tax rate. Overall, the revenue foregone due to tax benefits to the corporate sector aggregate to Rs 468 billion. Table 9.5: Tax Breaks and Concessions to the Corporate Sector[Financial](Rs in Billion) Tax Breaks/ Concessions Financial Companies Magnitude of Tax Expenditure 2020-21 1. Reduction in the tax rate from 44% to 29% 51 2. Tax deductibility provision against bad debt 23 TOTAL 74 95