Pakistan’s cost of tax exemptions and concessions, or total Federal Tax Expenditure, for the fiscal year 2023–24 has been estimated at Rs. 2,434.73 billion.
The Tax Expenditure Report (2025), issued by the Federal Board of Revenue (FBR), stated that the total federal tax expenditure constitutes 26.18% of the FBR’s total tax collection for FY 2023–24. This marks a significant decrease from the 54.15% recorded in the previous fiscal year.
In terms of economic size, the total tax expenditure represents approximately 2.32% of GDP during FY 2023–24, compared to 4.6% of GDP in the previous fiscal year.
According to the report, the amount of Rs. 2,434.73 billion is equivalent to 26.18% of the Federal Board of Revenue’s (FBR) total tax collection (FY 2023–24: Rs. 9,299.08 billion) or 2.32% of the country’s Gross Domestic Product (GDP) (FY 2023–24: Rs. 105,143 billion).
This figure reflects the revenue foregone by the government due to various tax exemptions, concessions, and preferential treatments across different tax regimes.
It is important to emphasize that the figures presented in this report are estimates and should not be interpreted to mean that eliminating a given tax expenditure would result in an equivalent increase in government revenue.
The actual fiscal impact of removing tax exemptions depends on several economic factors, including the nature of the activity affected, the responsiveness of taxpayers (elasticity), and prevailing market conditions. Additionally, the report does not account for any spillover effects that FBR tax expenditures might have on provincial tax systems.
By offering a transparent overview of the revenue foregone through various tax provisions, the report aims to support evidence-based policy decisions and foster a more informed public debate on the structure and equity of the federal tax system in Pakistan.
Overview of Federal Tax Expenditures (FY 2023–24):
- Income Tax: The estimated expenditure amounted to Rs. 545.23 billion, equivalent to 5.86% of the FBR’s total tax collection, 22.39% of the overall tax expenditure, or 0.52% of the country’s GDP.
- Sales Tax: The estimated expenditure totaled Rs. 1,237.11 billion, equivalent to 13.30% of the FBR’s total tax collection, 50.81% of the total tax expenditure, or 1.18% of GDP.
- Customs Duty: The estimated expenditure amounted to Rs. 652.39 billion, equivalent to 7.02% of the FBR’s total tax collection, 26.80% of the overall tax expenditure, or 0.62% of GDP.
