Export tax breaks cost Pakistan nearly Rs44bn in lost revenue

ISLAMABAD: Pakistan’s struggling economy took another hit in the last fiscal year, as tax exemptions and concessions granted to exporters resulted in a revenue loss of nearly Rs44 billion.

The revelation comes from the Federal Board of Revenue’s (FBR) Tax Expenditure Report 2025, which paints a sobering picture of how much the government is foregoing to support exporters at a time when debt levels are already at record highs.

Billions lost to exemptions

According to the report, nine different export-related schemes and statutory regulatory orders (SROs) chipped away at the national kitty during 2023-24. The biggest dent came from SRO.450(I)/2001, linked with Export Processing Zones, which alone cost the government Rs23 billion.

The Temporary Import scheme, governed under SRO.492(I)/2009, added another Rs17 billion to the tally. Similarly, the Export Oriented Unit under SRO.327(I)/2008 accounted for a Rs2 billion loss, while the Duty and Tax Remission for Exporters (DTRE) scheme took away Rs734 million.

Smaller but notable hits were recorded under the Manufacturing Bond Scheme (Rs712 million) and several other exemptions tied to Chapter 99 of the Pakistan Customs Tariff, though some categories such as scientific equipment, machinery for demonstrations, and packing materials had a negligible impact.

The FBR defended these schemes as part of efforts to boost exports by reducing upfront costs for businesses. However, critics argue that the benefits are not translating into proportionate growth in exports, raising questions about whether the concessions are worth the steep losses.

Mounting debt pressure

The report coincides with alarming new figures on Pakistan’s rising debt burden. A study by the Economic Policy & Business Development (EPBD) Think Tank shows that every Pakistani now carries a debt load of Rs318,252, up from just Rs90,047 in 2014. This represents an average annual rise of 13 percent over the past decade.

Pakistan’s public debt now equals 70.2 percent of its GDP, far above the 60 percent legal limit set under the Fiscal Responsibility and Debt Limitation Act, 2005. Comparatively, the country fares worse than most of its neighbours, standing only behind crisis-hit Sri Lanka in the region.

The Think Tank warns that Pakistan is caught in a “debt trap,” driven by a 71 percent rupee devaluation since 2020, soaring interest rates of up to 22 percent in 2023-24, and repeated breaches of debt sustainability thresholds. Without urgent fiscal reforms, export growth, and debt restructuring, analysts caution that the country risks sliding deeper into a full-blown financial crisis.