ISLAMABAD: The Federal Board of Revenue (FBR) has released its latest report highlighting the scale of tax exemptions granted, according to a report issued on Monday.
According to the findings, the total value of exemptions and concessions amounted to Rs2,434.73 billion, equivalent to 2.32% of the country’s Gross Domestic Product (GDP).
The report explained that these exemptions represent 26.18% of the FBR’s overall tax collection, which stood at Rs9,299.08 billion for the year. While the figures reflect a notable decline compared with the previous fiscal year—when tax exemptions equaled 54.15% of total revenue—the foregone amount still represents a significant portion of federal resources.
Breakdown of Exemptions
The report provides a detailed category-wise analysis:
• Income Tax: Estimated exemptions reached Rs545.23 billion, equivalent to 5.86% of total collection, 22.39% of overall exemptions, and 0.52% of GDP.
• Sales Tax: Exemptions were the highest in this category, amounting to Rs1,237.11 billion. This represented 13.30% of total collection, 50.81% of all exemptions, and 1.18% of GDP.
• Customs Duty: Exemptions worth Rs652.39 billion were reported, equal to 7.02% of total collection, 26.80% of overall exemptions, and 0.62% of GDP.
Key Observations
The analysis underscores that total federal tax exemptions have nearly halved compared to last year in terms of GDP, falling from 4.6% in FY 2022–23 to 2.32% in FY 2023–24. This reduction indicates a government effort to rationalize concessions and move toward a more balanced revenue structure.
However, the FBR cautioned that these estimates should not be interpreted as guaranteed revenue potential. Eliminating tax exemptions outright would not necessarily lead to a proportional increase in government revenue. The actual fiscal outcome depends on several factors, including taxpayer behavior, economic activity, and market elasticity. Moreover, the report clarified that the figures do not capture the indirect effects such exemptions might have on provincial revenue systems.
By presenting these findings, the FBR aims to foster transparency in fiscal policymaking and promote public debate about the fairness and efficiency of the federal tax system. Policymakers are expected to use the report as a reference for evaluating future reforms and striking a balance between revenue generation and economic incentives.
