Tax exemptions cost Rs1.76 trillion in FY22

Tax exemptions cost Rs1.76 trillion in FY22

ISLAMABAD: The cost of tax exemptions has been estimated at Rs1.76 trillion during the fiscal year 2021/2022 as compared with Rs1.31 trillion in the preceding fiscal year, according to Economic Survey of Pakistan released on Thursday.

The cost of exemptions and concessions under sales tax has increased to Rs1.014 trillion during fiscal year 2021/2022 as compared with Rs578 billion in the last fiscal year.

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The Federal Board of Revenue (FBR) granted duty exemptions and concessions to the tune of Rs343 billion in the outgoing fiscal year as compared with Rs288 billion in the preceding fiscal year.

The cost of exemptions and concessions under the head of income tax, however, declined to Rs399.66 billion in the fiscal year 2021-2022 as compared with Rs448 billion in the last fiscal year.

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The survey said that there are a variety of factors responsible for the low tax to GDP ratio including a narrow tax base particularly agriculture contributing minimally to the tax collection, tax evasion, poor documentation, the informal economy, exemptions/concessions, smuggling, weak audit & enforcement, a lack of automation, and lengthy litigation.

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As a result of insufficient tax revenues, the country has faced numerous challenges over the years in providing much-needed fiscal space for priority areas such as infrastructure, education, health, and targeted social assistance.

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