ISLAMABAD: The Income Tax Expenditure (cost of exemption) has been estimated at Rs 476.96 billion during 2022-23.

The Federal Board of Revenue’s (FBR) latest Tax Expenditure-Report (2024) revealed that the income tax expenditures fall into various categories i.e. tax concessions given in the form of allowances, credits, exemptions, reduced rates, exclusion, etc.

Income tax expenditure accounted for 12.30% of the total tax expenditure in FY2022-23. It has increased by 12.52% in comparison with 2021-22.

Tax expenditures constitute 36.43pc of FBR tax collection?

The Income Tax expenditures measured in terms of GDP have reduced from 0.64% in 2021-2022 to 0.57% of GDP in the 2022-23.

An increase in exemptions amounting to Rs 61.06 billion i.e. 26.3 percent is witnessed under “Exemption from Total Income”, followed by Rs. 30.68 billion & Rs. 1.05 billion under “Exemptions Under Part VII of Chapter III (ITO, 2001)” & “Reduction in Tax Rates” respectively. The largest drop in absolute terms amounting to Rs. 27.76 billion i.e. 53.2 percent is seen in “Tax Credits”.

Major beneficiary sectors under Income Tax Expenditure The cumulative sum of income tax expenditures availed by top 10 sectors, amounts to Rs. 459,164.50 million which is 96.27% of the total income tax expenditure. It accounts for 11.84% of the total tax expenditure incurred during the FY 2022-23.

Copyright Business Recorder, 2024