Pakistan grants tax exemptions, concessions of PKR 3.88 trillion in FY23

The Pakistani government granted tax exemptions and concessions worth PKR 3.88 trillion ($13.5 billion) for fiscal year 2022-23 (FY23), a 36.43% increase from the previous year's PKR 2.2 trillion.

This amount represents 54.15% of the Federal Board of Revenue's (FBR) total tax collection for the year, the board noted in its annual report.

This significant rise was mainly due to the zero-rating of sales tax on certain petroleum products, export relief measures, and other economic stabilization efforts.

In FY23, Pakistan's GDP increased by 27.1%, reaching PKR 84,068 billion. The Large-Scale Manufacturing (LSM) sector grew by 21.2%, from PKR 7,041 billion to PKR 8,534 billion.

Exports also saw a 21.2% rise, from PKR 5,661 billion to PKR 6,859 billion. However, inflation increased from 21.35% to 29.4%.

The FBR's annual report highlights a five-year trend of rising tax concessions. The most significant growth was in sales tax concessions, which doubled compared to FY22, growing at a rate of 120.9%.

About 50% of these sales tax concessions were due to the zero-rating of petroleum products. There was also growth in concessions under the income tax and customs duty regimes.

Tax expenditures include special provisions within the tax code, such as exclusions, deductions, deferrals, credits, and reduced tax rates, benefiting specific activities or groups.

Globally, developed countries tend to have higher tax expenditures compared to less developed nations.