Total tax exemptions, concessions, zero-rating, and special tax treatments to various businesses, sectors, lobbies, and investors cost the government Rs3,879.2 billion in 2023-24, up from Rs2,239.6 billion in 2022-23. This reflects an increase of Rs1,639.6 billion compared to the previous fiscal year.
The tax expenditure report for 2024, issued on Tuesday, revealed a 73% increase in the cost of tax exemptions compared to the previous fiscal year. The report did not include revenue losses from tax exemptions for industrial units in former tribal areas.
Of the total Rs3,879.2 billion in exemptions for 2023-24, sales tax exemptions on local supplies of petroleum products accounted for Rs1,257.513 billion.Â
The Economic Survey 2023-24 highlighted that sales tax exemptions caused the highest revenue loss, compared to income tax and customs duty exemptions.Â
Sales tax exemptions totaled Rs2,858.721 billion, customs duty exemptions Rs543.521 billion, and income tax exemptions Rs476.960 billion.
The exemption on petroleum products imports caused an additional revenue loss of Rs81.225 billion. The fixed sales tax regime on cellular mobile phones resulted in a revenue loss of Rs33.057 billion in 2023-24, up from Rs1.021 billion in 2022-23.
The Federal Board of Revenue (FBR) reported a revenue loss of Rs214 billion from sales tax exemptions on imports in 2023-24, down from Rs257 billion in 2022-23. Sales tax exemptions on local supplies caused a revenue loss of Rs461 billion in 2023-24, an increase of over Rs328 billion from the previous year.
Income tax exemptions amounted to Rs476.9 billion, up from Rs423.9 billion, an increase of Rs53 billion. Customs duty exemptions cost Rs543.5 billion in 2023-24, up from Rs521.7 billion, an increase of Rs21.8 billion.
The survey did not mention revenue losses from exempt business income for independent power producers (IPPs) or capital gains. Tax credits resulted in a revenue loss of Rs24.374 billion in 2023-24, down from Rs52.133 billion in 2022-23.
Income tax exemptions from special provisions of the Income Tax Ordinance resulted in a revenue loss of Rs62.756 billion in 2023-24, down from Rs68.841 billion in 2022-23. Exemptions from total income had a revenue impact of Rs293.460 billion.
Exemptions available to government income caused a revenue loss of Rs57.517 billion, while deductible allowances caused a loss of Rs5.912 billion, down from Rs14.506 billion. The reduction in income tax rates had revenue implications of Rs25.492 billion in 2023-24, up from Rs24.444 billion in 2022-23.
