The Federal Government has unveiled the Tax Expenditure Report 2025, identifying the key sectors benefiting from income tax exemptions, concessions, and reduced rates during the fiscal year 2023-24.
According to the report, the largest beneficiaries include pension and social security, energy and mining, financial services, education, donations and charities, tribal areas, information technology, salaried individuals, and the health sector.
The report noted that income tax expenditure, covering allowances, credits, exemptions, reduced rates, and exclusions, is a significant component of the overall tax relief framework. For FY 2023-24, income tax expenditure was estimated at Rs. 545.229 billion, representing 22.39% of total tax expenditure. When measured against GDP, income tax expenditures declined from 0.57% in FY 2022 to 0.52% in FY 2023-24.
Interestingly, the report highlighted that no sales tax exemptions exist for petroleum products, which remain subject to the Petroleum Development Levy (PDL) instead.
On the sales tax front, the report revealed that Sales Tax Expenditure for FY 2023-24 stood at Rs. 1,237.11 billion, marking a decline of 18.61% compared to FY 2022-23. This amount constitutes 50.81% of total tax expenditure and equals 1.18% of GDP for the fiscal year.
The Tax Expenditure Report 2025 underscores the government’s continued focus on balancing fiscal incentives with revenue needs, while gradually rationalizing exemptions to broaden the tax base.
