Islamabad, July 7 — The Federal Board of Revenue (FBR) has sounded the alarm on Pakistan’s revenue shortfall, attributing a substantial portion of it to tax exemptions. The 2024 Tax Expenditure Report reveals eye-opening figures that underscore the need for a closer examination of our tax policies.
While tax exemptions serve as incentives and promote economic activities, they also come at a cost. The FBR’s report highlights the following key points:
Pensioners’ Exemptions and the PKR 78 Billion Loss:
- Income tax exemptions granted to pensioners alone resulted in an annual revenue loss of PKR 78 billion. While supporting retirees is essential, striking the right balance between relief and revenue generation remains a challenge.
Top 10 Sectors Benefit Disproportionately:
- A mere ten sectors account for a staggering 96.27% of the total income tax expenditure. These privileged sectors received exemptions totaling PKR 459.16 billion. It’s time to scrutinize whether these exemptions truly serve the greater good or perpetuate inequality.
Sector-Specific Impacts:
- The financial sector, despite its robust performance, experienced a revenue loss of PKR 115 billion due to exemptions.
- Social security exemptions led to a loss of PKR 60 billion, affecting the safety nets for vulnerable citizens.
- The state apparatus, responsible for governance and public services, suffered a negative impact of PKR 57 billion.
- Energy and mining, critical for economic growth, saw a combined revenue loss of PKR 41 billion.
- The health and pharmaceutical sector, especially relevant during a pandemic, had exemptions totaling PKR 14 billion.
These exemptions collectively strain the national budget, affecting essential services, infrastructure development, and social welfare programs. As policymakers deliberate on tax reforms, finding a delicate equilibrium between stimulating economic activity and ensuring fiscal stability becomes paramount.
