Islamabad, June 9, 2025 – Pakistan’s tax exemptions and concessions have soared to a record Rs5.84 trillion during the fiscal year 2024-25, as revealed in the Economic Survey of Pakistan 2024-25 launched today by Finance Minister Mohammad Aurangzeb.
This marks a significant rise of over 50% compared to last year’s Rs3.88 trillion, raising questions about the long-term impact on revenue generation and fiscal sustainability.
According to the Tax Expenditure Report 2025, the largest portion of these tax exemptions comes from the sales tax segment, which alone accounted for Rs4.25 trillion in forgone revenue—up from Rs2.86 trillion last year, reflecting a 49% increase. These sales tax exemptions include relief measures across various sectors such as agriculture, pharmaceuticals, food items, and petroleum products.
The cost of tax exemptions in income tax also registered a significant jump. In FY2024-25, income tax exemptions and concessions reached Rs801 billion, showing a staggering 68% increase from the previous year’s Rs477 billion. These exemptions were primarily granted in the form of reduced rates, tax credits, and income exclusions for certain categories of taxpayers, including exporters and charitable institutions.
Meanwhile, customs duty exemptions and concessions also saw a notable rise, climbing by 45% to Rs786 billion in FY25 from Rs543 billion the previous year. These customs-related tax benefits were largely provided to promote industrial growth, support local manufacturing, and facilitate imports of essential raw materials.
While these tax exemptions are aimed at boosting economic activity and supporting key sectors, they also represent a substantial revenue loss for the government. Experts suggest that a more targeted approach to tax relief may be necessary in future budgets to ensure transparency, equity, and sustainable fiscal management.
The government has acknowledged the need to reassess the structure and scope of tax exemptions, signaling potential reforms in the upcoming budget to minimize revenue leakage while maintaining necessary economic support.