Tax exemptions soar to Rs 5,840b in 2024-25: Economic Survey

The federal government has granted a staggering Rs 5,840 billion in tax exemptions during the fiscal year 2024-25, according to figures revealed in the Economic Survey.

The largest chunk of these exemptions—Rs 4,253 billion—was attributed to sales tax waivers, reflecting the government’s approach to maintain economic momentum amid inflationary pressures.

Income tax exemptions stood at Rs 800 billion, while customs duty reliefs amounted to Rs 785 billion, signalling broad fiscal leniency.

Under the Fifth Schedule, which includes tax-free imports of raw materials and industrial inputs, exemptions totalled Rs 683.42 billion, whereas the Sixth Schedule, covering basic food and health items, accounted for Rs 613 billion in waived taxes. The Eighth Schedule saw exemptions worth Rs 372.52 billion, and Rs 87 billion was waived under the Ninth Schedule, notably for mobile phones.

In the petroleum sector, the government granted Rs 1,496 billion in exemptions on local supply and Rs 299.64 billion on petroleum imports, highlighting the critical effort to control fuel-related inflation.

Additionally, tax credits resulted in revenue forgone of Rs 101.44 billion, and Rs 122.59 billion in other general exemptions were provided without specific categorisation.

Other significant concessions included: Rs 379 billion under the Fifth Schedule,  Rs 133.23 billion in reliefs linked to automobiles, CPEC, and miscellaneous sectors, Rs 178 billion on exports, and Rs 60.79 billion under Free Trade Agreements (FTA) and Preferential Trade Agreements (PTA).

The extensive scale of these tax exemptions raises questions about fiscal sustainability, especially as Pakistan seeks to broaden its tax base and meet IMF benchmarks.

Economists warn that while these exemptions may support short-term growth and public relief, they also represent substantial revenue losses that could have been directed towards development and debt servicing