Mohsin Siddiqui (Chief Reporter)
Total tax exemptions, concessions, zero-rating, and special tax treatments provided to various businesses, sectors, industries, lobbies, groups, and investors have resulted in a substantial cost to the government, amounting to Rs3,879.2 billion in the fiscal year 2023-24. This figure represents a significant increase from the Rs2,239.6 billion recorded in the fiscal year 2022-23, marking an increase of Rs1,639.6 billion.
The Tax Expenditure Report 2024, released on Tuesday, revealed that the cost of tax exemptions grew by 73 percent in 2023-24 compared to the previous fiscal year. Notably, the report did not account for the revenue loss due to tax exemptions available to industrial units located in the erstwhile tribal areas during 2023-24.
Out of the total Rs3,879.2 billion in exemptions, the sales tax exemption on local supplies of petroleum products (SRO.321(I)/2022) accounted for a massive revenue loss of Rs1,257,513 million in the current fiscal year. This exemption was the largest contributor to the overall revenue loss.
According to the Economic Survey 2023-24, the sales tax expenditure was the highest during 2023-24, surpassing revenue losses from income tax and customs duty. The breakdown is as follows:
Sales Tax Exemptions/Concessions: Rs2,858.721 million Customs Duty Loss: Rs543,521 million Income Tax Revenue Loss: Rs476,960 million
The largest single contributor to the increase in sales tax exemptions was the statutory regulatory orders (SROs) that exempted petroleum products from sales tax. This exemption alone resulted in a revenue loss of Rs1,257,513 million during 2023-24. Additionally, the sales tax exemption on the import of petroleum products led to a further revenue loss of Rs81,225 million during this period.
An interesting figure from the survey shows that the fixed sales tax regime on cellular mobile phones caused a revenue loss of Rs33,057 million in 2023-24, compared to Rs1,021 million in 2022-23. This substantial increase highlights the impact of tax policies on the telecommunications sector.
The Federal Board of Revenue (FBR) experienced a revenue loss of Rs214 billion due to sales tax exemptions on imports in 2023-24, a decrease from Rs257 billion in 2022-23, reflecting a reduction of Rs43 billion. Conversely, the sales tax exemption on local supplies led to a revenue loss of Rs461 billion in 2023-24, compared to Rs133 billion in the previous year, an increase of over Rs328 billion.
The cost of income tax exemptions amounted to Rs476.9 billion, up from Rs423.9 billion, showing an increase of Rs53 billion. Similarly, customs
