Exemptions hit record as tax revenue falls short

Tax exemptions granted by the Federal Board of Revenue (FBR) surged to an all-time high of Rs5.84 trillion in the outgoing fiscal year, marking a 51 per cent increase from Rs3.879tr a year ago, according to the Pakistan Economic Survey 2024-25 unveiled by Finance Minister Muhammad Aurangzeb on Monday. The unprecedented rise in tax concessions comes at a time when the FBR is grappling with significant revenue shortfalls, making this the second consecutive year of record-high exemptions. In FY24, exemptions skyrocketed 73.3pc. The cost of tax exemptions has gone up for the seventh consecutive year despite the government’s claim that exemptions would gradually decrease under the International Monetary Fund (IMF) programme. Tax exemptions refer to the revenues foregone by the state under various categories to different industries and other groups. This is mainly due to exemptions on raw materials and semi-finished products, as well as specific sectors aimed at reducing input costs for export-oriented industries.