Financial Year 2024-25: Massive Tax Cuts Totaling Rs5.8 Trillion Slashed Exchequer
Revised Article:
Hey there! Let's talk about the jaw-dropping news that's been making waves in Pakistan - the staggering revenue loss due to tax exemptions revealed in the Economic Survey 2024-25.
Stubbornly clinging to the missed growth target wasn't the only shocker; the survey unveiled that Pakistan's economic passers-by pocketed a whopping Rs5.85 trillion in tax exemptions last fiscal year. Interestingly, Finance Minister Aurangzeb celebrated the doubling of individual tax filers, but remained tight-lipped about the escalating cost of these exemptions, despite promises of their consistent abolition.
It's essential to mention that the overall cost of tax exemptions has skyrocketed to Rs5.84 trillion in 2024-25 from a measly Rs3.87 trillion in 2023-24, reflecting an eye-popping increase of Rs1.96 trillion. That's a sensational 50% surge during 2024-25 compared to the tax expenditure in the previous year.
Several culprits led this raucous party, with the sales tax exemption on petroleum products, duty concessions on imports, reduced rates of sales tax, and overall sales tax exemptions on imports and local supplies being the rambunctious ring leaders. Unfortunately, the Economic Survey didn't bother to pick up the check for the exemption cost provided to FATA/PATA Areas.
You guessed it! The single, gigantic tippler among these rowdy revelers was the exemption from sales tax on petroleum products via Statutory Regulatory Orders (SROs), causing a staggering revenue loss of a whopping Rs1,496,124 million during 2024-25. Sales tax exemption on the import of petroleum products wasn't a far sight behind, causing a revenue loss of Rs299,640 million during this period.
Sales tax exemptions incurred a loss of Rs372 billion for the Federal Board of Revenue (FBR) on account of imports during 2024-25 compared to a mere Rs214 billion during 2023-24, representing another exasperating increase of Rs158 billion. And it's not all doom and gloom for petroleum products alone – the cost of electricity has also taken its fair share, with the FBR suffering an additional loss of more than Rs152 billion on account of sales tax exemptions on local supplies.
The renowned FBR has been waving the white flag of surrender against the brutal onslaught of revenue loss, with an estimated loss of a whopping Rs985.594 billion in 2024-25 compared to a relatively tame loss of Rs675 billion in 2023-24 on account of sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss due to sales tax exemptions (import and domestic stage) has been boosted by a whopping Rs985 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 a whopping Rs683.429 billion during the period under review against a measly Rs206.053 billion in 2023-24, representing an exasperating increase of a mind-boggling Rs477.376 billion.
The FBR has failed to specify any revenue loss due to exemptions within the federal excise regime, suggesting no losses on this account. However, it's important to remember that the FBR suffered a massive revenue loss of Rs985.594 billion in 2024-25 compared to Rs675 billion in 2023-24 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act.
In summary, the surge in revenue loss due to tax exemptions can be attributed to the extension of existing exemptions, new or expanded relief measures for low- and middle-income groups, and persistent structural issues in tax compliance and enforcement, as identified in various analyses and budget documents. So, here's to hoping for a much-needed overhaul of our tax policies! 🥂
- The escalating cost of tax exemptions in Pakistan's business sector reached an astonishing Rs5.85 trillion in the last fiscal year, according to the Economic Survey 2024-25, raising concerns about the country's financial stability in the sphere of finance.
- The Finance Minister Aurangzeb's celebration of doubling individual tax filers was somewhat overshadowed by the startling revelation of a 50% surge in the overall cost of tax exemptions, despite promises of their consistent abolition, casting doubts on the country's business sector and financial discipline.
