ISLAMABAD: Total tax exemptions, concessions/reduced rates, zero-rating and special tax treatments to various businesses, sectors/industries, lobbies/groups and investors have cost the government Rs 2,352.81 billion in 2025-26 against the downward revised figure of Rs 2,434.73 billion in 2024-25, reflecting a decrease of Rs 81.92 billion.
The Economic Survey (2025-26) released on Thursday revealed that the cost of tax exemptions showed a decrease of 3.36 per cent during 2025-26 as compared to tax exemptions in 2024-25.
However, tax expenditure (cost of exemptions) totaled at Rs 2,352.81 billion during 2025-26 as compared to the original figure of Rs 5,840.2 billion in 2024-25, reflecting a massive decrease of Rs 3,487.39 billion. The figure of Rs 5,840.2 billion for the cost of tax exemptions was given in the Economic Survey (2024-25) issued last year.
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In this case, the cost of tax exemptions witnessed a decrease of 59.71 per cent during 2025-26 as compared to tax expenditure in 2024-25.
The tax expenditure figure of Rs 2,352.81 billion for 2025-26 has been mentioned in the Economic Survey (2025-26) launched here on Thursday.
It is important to mention that the Ministry of Finance had issued a figure of Rs 5,840.2 billion of tax expenditure for 2024-25 last year.
Later, the Ministry of Finance has downward revised the tax expenditure figure for 2024-25 from Rs 5,840.2 billion to Rs 2,434.73 billion, reflecting a decrease of Rs1,850.5 billion. The Ministry of Finance has issued “Errata” of the tax expenditure figure for 2024-25 in last year’s Economic Survey (2025).
If the total cost of exemptions (Rs 2,352.81 billion) during 2025-26 has been compared with the downward revised figure of 2024-25, i.e.,Rs 2,434.73 billion, the total cost of tax exemptions now stands at Rs 81.92 billion for 2025-26.
Breakup of downward revised tax expenditure figures or corrected figures for 2024-25 revealed that the cost of income tax exemption was Rs 545.23 billion; sales tax Rs 1,237.11 billion and customs duty Rs 652.39 billion, taking total to revised figure of Rs 2,434.73 billion, as per corrected summary of tax expenditure (Errata) for 2024-25.
The tax-expenditure report-2026 pinpointed that sales tax exemption to petroleum products, duty concessions on imports, reduced rates of sales tax, and overall sales tax exemptions on imports and local supplies were major contributors to the increased revenue loss during 2025-26.
The latest survey has not mentioned revenue loss on account of tax exemptions available to industrial units located in erstwhile tribal areas during 2025-26.
The revenue loss due to sales tax exemption from imports and local supplies stood at Rs 566,949 billion in 2025-26.
The Economic Survey (2025-26) disclosed that the sales tax expenditure remained the highest during 2025-26 as compared to revenue loss on account of income tax and customs duty. All kinds of sales tax exemptions/concessions caused revenue loss of Rs 1,273,977 million; followed by income tax loss of Rs 579,698 million and customs duty revenue loss of Rs 499,136 million during 2025-26.
The survey disclosed that the fixed sales tax regime on cellular mobile phones caused a revenue loss of zero rupees in 2025-26 as compared to Rs 87,950 million in 2024-25. The Federal Board of Revenue (FBR) has suffered a revenue loss of Rs261 billion on account of sales tax exemption on imports during 2025-26 as compared to Rs372 billion during 2024-25, reflecting a decrease of Rs111 billion.
Sales tax exemption on local supplies caused a revenue loss of Rs305 billion in 2025-26 as compared to Rs613 billion in 2024-25, reflecting a decrease of Rs308 billion.
The cost of income tax exemptions amounted to Rs579.7 billion against Rs800.8 billion, showing a decrease of Rs221.1 billion and the cost of customs duty exemptions was Rs499.14 billion in 2025-26 against Rs785.8 billion in 2024-25, reflecting a decrease of Rs286 billion.
The Economic Survey has not mentioned revenue loss on account of the exempt business income granted to independent power producers (IPPs).
Similarly, the survey has not mentioned any revenue loss from capital gains. The accumulative revenue loss on account of tax credits amounted to Rs75,940 billion in 2025-26 against Rs101 billion in 2024-25, showing a decrease of Rs26 billion.
The income tax exemption from special provisions of the Income Tax Ordinance has caused revenue loss of Rs10.9 billion during 2025-26 as compared to Rs41.1 billion in 2024-25.
The income tax exemption from total income has revenue impact of Rs 437,996 billion during the period under review.
The income tax exemption available to the deductible allowances caused revenue loss of Rs 4.01 billion in 2025-26 against Rs 16.4 billion in 2024-25, showing a decrease of Rs 12.4 billion.
The reduction in income tax rates has revenue implications of Rs50.71 billion during 2025-26 as compared to Rs 45 billion in 2024-25, showing an increase of around Rs 5 billion.
The FBR has suffered a massive revenue loss of Rs566.95 billion in 2025-26 as compared to Rs985.594 billion in 2024-25 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss on account of sales tax exemption (import and domestic stage) has been decreased by nearly Rs565 billion.
The FBR has suffered a loss of Rs635.841 billion due to sales tax exemptions available under the Eight Schedule (Conditional Exemption/reduced rates) of the Sales Tax Act, 1990, during the period of 2025-26 against Rs617.347 billion in 2024-25. The revenue loss from conditional exemptions has been decreased by Rs635.22 billion. The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs8.774 billion during the period under review against Rs 6.83.429 billion in 2024-25. The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account. The cost of income tax exemptions was Rs579.7 billion in 2025-26 against Rs800.8 billion in 2024-25.
The cost of exemptions in respect of customs duty has been calculated at Rs499.14 billion in 2025-26 as compared to Rs785.9 billion in 2024-25, reflecting a decrease of Rs286.76 billion.
The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs 17 billion in 2025-26 against Rs 33.481 billion in 2024-25, reflecting a decrease of Rs 1.383 billion.
The concessions under the Fifth Schedule of the Customs Act, 1969 caused a revenue loss of Rs 205.655 billion in 2025-26 against Rs 379.746 billion in 2024-25, reflecting a decrease of Rs174.091billion.
The FBR has suffered revenue loss of zero rupees in 2025-26 against Rs 61 billion in 2024-25 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs).
Similarly, exemption of customs duty on the items by the automobile sector, exploration and production (E&P) companies, general concessions and the CPEC caused a loss of Rs 275.772 billion in 2025-26 against Rs 133.236 billion in 2024-25, showing an increase of Rs142.48 billion.
The export-related exemptions cost revenue loss of zero rupees during 2025-26 against Rs178.435 billion during 2024-25.
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