Islamabad, September 26, 2025 – The Federal Board of Revenue (FBR) has clarified that several income tax exemptions and concessions have been deliberately excluded from its official estimates in the newly issued Tax Expenditure Report 2025.
According to the report, these exemptions are not considered tax deviations but instead form part of the structural framework of the tax system or are linked to Pakistan’s international commitments. As such, they are not categorized as tax expenditures in the report’s calculations.
The document explains that certain provisions, such as the minimum income threshold for individuals, represent necessary policy choices rather than concessions. Similarly, inter-corporate dividend exemptions are designed to prevent double taxation within corporate groups, while agricultural income is constitutionally excluded from federal taxation.
Diplomatic concessions also feature prominently, with exemptions granted to foreign missions, diplomats, and international organizations including United Nations agencies. These reflect Pakistan’s adherence to international agreements and diplomatic protocols.
Additionally, concessions arising from Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs), and other bilateral or multilateral treaties have been treated as obligations rather than optional reliefs. The FBR emphasized that these arrangements directly influence trade and investment flows, making their exclusion from tax expenditure estimates a matter of necessity.
By distinguishing between policy-driven structural exemptions and discretionary reliefs, the FBR aims to provide a more transparent and credible picture of actual revenue foregone. Officials believe this clarity will strengthen tax policy debates and help avoid misconceptions about the country’s overall tax effort.