Karachi, April 6, 2025 – In a striking revelation, the Federal Board of Revenue (FBR) has disclosed that distributors of cigarette and pharmaceutical products received a staggering Rs14.53 billion in tax concessions during the last fiscal year.
This information was made public in the FBR’s recently released Tax Expenditure Report 2024, shedding light on the financial impact of reduced tax rates granted under specific legal provisions.
The report reveals that cigarette and pharma distributors benefitted from a reduced rate of income tax, as provided under Clause 24A of Part II of the Second Schedule of the Income Tax Ordinance, 2001. According to the FBR, this concession allows a significantly lower tax rate of just 1% of the gross amount of payments for these sectors, under clause (a) of sub-section (1) of Section 153.
This preferential treatment, particularly for cigarette distributors, has raised eyebrows among financial analysts and public health advocates. Critics argue that while the cigarette industry contributes to health-related challenges across Pakistan, it continues to enjoy lenient tax policies that reduce the overall revenue potential for the government.
Similarly, although pharmaceutical distribution plays a crucial role in healthcare delivery, the scale of the tax relief offered has sparked debates over equity and fiscal responsibility. With over Rs14.5 billion in foregone revenue, many are now questioning whether such blanket concessions should be reassessed, especially given Pakistan’s ongoing struggle to broaden its tax base.
The FBR’s report underscores the need for greater transparency and evaluation in the country’s tax policy decisions. It also calls attention to the long-term implications of offering favorable tax treatments to sectors like cigarette distribution, which continue to thrive despite contributing to public health concerns.
As the government explores new strategies to boost tax collection and reduce fiscal deficits, it remains to be seen whether such concessions will be maintained or rolled back in future budget cycles. Stakeholders from both the public and private sectors are now expected to engage in critical discussions regarding the balance between economic incentives and national interests.