Annual Economic Survey reveals a minor overall dip in state giveaways, though sales tax and income tax exemptions continue to rise.
ISLAMABAD: The Federal Board of Revenue (FBR) extended a staggering Rs2.53 trillion in tax exemptions and concessions during the 2024–25 fiscal year (FY2025), according to the Pakistan Economic Survey 2025–26 released on Thursday.
The total cost of these state-backed tax exemptions and concessions registered a minor 3.33 percent decline when compared with the Rs2.43 trillion recorded in the preceding fiscal year. However, despite the marginal overall drop, both sales tax and income tax categories saw a noticeable increase in exemptions during the fiscal year under review.
Income and Sales Tax Exemptions Surge Higher
A detailed breakdown of the data shows that the fiscal cost of tax exemptions and concessions within the income tax category surged by 6.42 percent. The total revenue foregone reached Rs580 billion in FY2025, compared with Rs545 billion recorded in FY2024.
Similarly, sales tax exemptions and concessions continued to hit the national exchequer hard. This segment cost the government a massive Rs1.274 trillion in FY2025, marking an increase from the Rs1.237 trillion waived during the previous fiscal year.
Customs Duty Exemptions Witness a Remarkable Decline
In contrast to the upward trajectory seen in domestic taxes, the exemptions and concessions granted on customs duties experienced a significant drop.
Under the customs segment, the total cost of exemptions fell sharply by 23.67 percent. The figure plummeted to Rs499 billion in FY2025, down from the Rs652 billion recorded in FY2024, indicating stricter controls on import-stage concessions.
Breakdown of Tax Exemptions and Concessions (FY2024 vs FY2025)
| Tax Category | FY2023–24 (Trillion Rs) | FY2024–25 (Trillion Rs) | YoY Change (%) |
| Sales Tax | 1.237 | 1.274 | +2.99% |
| Income Tax | 0.545 | 0.580 | +6.42% |
| Customs Duty | 0.652 | 0.499 | -23.67% |
| Total FBR Cost | 2.430 | 2.530 | -3.33% |
Economic analysts suggest that while the contraction in customs concessions is a positive step toward fiscal consolidation, the persistent rise in sales and income tax breaks highlights the ongoing challenge of broadening the domestic tax base.
The data underscores the urgent need for structural revenue reforms to further eliminate non-targeted subsidies and secure long-term fiscal sustainability for the country.
