Rs2.35trn granted as tax exemptions and concessions in FY25, NA told

ISLAMABAD: The National Assembly was informed on Monday that the government granted tax exemptions, concessions, reduced rates and special treatments worth Rs2.35 trillion in 2024-25, while a comprehensive assessment of the costs and benefits of major tax incentives is targeted for completion by June 2027.

In a written reply to a question by Shaista Pervaiz, Minister for Finance and Revenue Muhammad Aurangzeb said total tax expenditures stood at Rs2.352 trillion in 2024-25, compared with Rs2.434 trillion in 2023-24.

The figure had peaked at Rs2.54 trillion in 2022-23, after rising from Rs1.482 trillion in 2020-21 to Rs2.239 trillion in 2021-22.

The figures cover income tax, sales tax and customs duty expenditures arising from exemptions, concessions, reduced rates and other special treatments.

The minister said the revenue foregone on account of these measures was the same as the amounts reported in the tax expenditure tables.

The reply did not provide a separate assessment of the economic benefits generated by individual concessions.

Instead, it stated that the Tax Policy Office (TPO) of the Ministry of Finance would develop an Expanded Tax Expenditure Statement incorporating cost-benefit assessments of the most significant tax incentives and expenditures, with completion targeted by June 2027.

Income tax expenditures increased to Rs579.698 billion in 2024-25 from Rs545.230 billion in the preceding fiscal year.

The reported total has risen each year over the five-year period, from Rs399.662 billion in 2020-21 to Rs423.894 billion in 2021-22 and Rs476.960 billion in 2022-23.

Exemptions from total income accounted for the largest reported component of income tax expenditures in 2024-25, at Rs437.996 billion, compared with Rs443.445 billion in 2023-24.

Tax credits amounted to Rs75.94 billion in 2024-25, while reductions in tax rates accounted for Rs50.712 billion. Allowances stood at Rs4.014 billion and reductions in tax liability at Rs10.91 billion.

Exemptions from specific provisions were reported at Rs125 million in 2024-25, compared with Rs19.642 billion in the category of reduction in tax liability in the preceding year.

No amounts were reported against government exemptions or SRO-related exemptions for 2024-25 in the table supplied to the House.

Sales tax expenditures totalled Rs1.274 trillion in 2024-25, up from Rs1.237 trillion in 2023-24, though below the Rs1.52 trillion recorded in 2022-23.

Reduced rates under the Eighth Schedule were the largest listed component in 2024-25, amounting to Rs635.841 billion. This was up from Rs374.110 billion in 2023-24 and Rs357.997 billion in 2022-23.

Exemptions on local supplies under the Sixth Schedule amounted to Rs305.628 billion in 2024-25, while exemptions on imports under the same schedule stood at Rs261.324 billion.

The Twelfth Schedule, relating to additional tax, accounted for Rs57.879 billion, while zero-rating under the Fifth Schedule amounted to Rs8.774 billion. SROs relating to local supplies accounted for Rs3.802 billion, and SROs on imports for Rs729 million.

The table also records Rs632.950 billion in exemptions on petroleum, oil and lubricants (POL) products in 2021-22, with no amount reported under that head for the other four years shown.

Tax on cellular mobile phones under the Ninth Schedule was recorded at Rs1.325 billion in 2023-24, while no amount was reported for 2024-25.

Customs duty expenditures declined to Rs499.137 billion in 2024-25 from Rs652.390 billion in 2023-24. They had stood at Rs543.521 billion in 2022-23, Rs521.704 billion in 2021-22 and Rs342.890 billion in 2020-21.

General concessions covering the automobile sector, exploration and production companies, the China-Pakistan Economic Corridor (CPEC) and other areas amounted to Rs275.772 billion in 2024-25, compared with Rs133.236 billion a year earlier.

Concessions under the Fifth Schedule stood at Rs205.655 billion, down from Rs379.746 billion in 2023-24.

Exemptions under Chapter 99 amounted to Rs17.710 billion.

No amounts were reported for free trade agreements and preferential trade agreements (FTA/PTA), or for export-related exemptions, in the 2024-25 column, although both categories recorded expenditures in earlier years.

Responding to the question about rationalising tax expenditures and broadening the tax base, the minister said the Tax Policy Office was formulating a medium-term tax simplification strategy.

The minister said special tax procedures for small traders, shopkeepers and SMEs recognised their limited compliance capacity compared with large corporate taxpayers.

The approach, he added, was intended to build trust and increase voluntary compliance.

Copyright Business Recorder, 2026