ISLAMABAD: The share of direct taxes in overall tax collection of the Federal Board of Revenue (FBR) rose to 48.7 percent in 2024-25, merely due to increase in collection from advance taxes and withholding taxes.
According to the Economic Survey (2024-25) issued on Monday, Pakistan’s tax system is heavily reliant on indirect taxes. However, various efforts aimed at improving the share of direct taxes are underway and have started to yield significant results. Since 2021-22, the share of direct tax in total FBR revenues has consistently risen from 36.5 percent to 48.7 percent in 2024-25.
In 2024-25, the increase in the share is primarily due to a 56.9 percent growth in advance taxes, followed by a 36.5 percent increase in withholding taxes, and a 35.8 percent growth in collections with returns.
1HFY25 direct tax collection rises 29.4pc YoY
Direct tax has also witnessed a significant shift in its composition as the share of advance taxes increased from 29.8 percent to 33.8 percent, while there was a marginal decline in the contribution of withholding taxes from 61.4 percent to 60.5 percent in 2024-25.
In contrast, the contribution of indirect taxes reduced from 63.5 percent in 2021-22 to 51.3 percent in 2024-25. The increase in direct taxes relative to indirect taxes reflects the government’s commitment to make taxation progressive and equitable. The component-wise share indicates that sales tax accounted for 37.9 percent, FED 7.3 percent, and customs 12.3 percent in total FBR tax collection during 2024-25, the Economic Survey added.
Copyright Business Recorder, 2025
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