ISLAMABAD: Official documents reveal that Independent Power Producers (IPPs) have received a Rs168 billion tax exemption from the federal government.
The Auditor General of Pakistan’s latest report highlights poor oversight of these exemptions, exposing weaknesses in the Federal Board of Revenue’s (FBR) control.
According to Section 53 (a) of the Income Tax Ordinance, 2001, IPPs are exempt from income tax under specific conditions.
These include being managed by a registered company, not being formed from an existing business, and not being controlled by government entities.
The audit found that tax exemptions for electric generation projects from FY-2018 to 2022 totaled Rs167.9 billion for 220 IPPs.
However, the audit criticized the lack of detailed scrutiny of these exemptions, noting that self-assessment systems have led to unreviewed tax returns.
Profit from bank deposits, capacity charges, and dividends earned by IPPs also need proper scrutiny, the audit recommended.
Despite the substantial tax breaks, ongoing issues in the power sector persist.
The audit suggests that tax expenditure on IPPs be monitored more effectively and linked with power policy.
It also recommends implementing a mechanism to ensure full production capacity utilization and regular audits by the FBR.
