ISLAMABAD – The Federal Board of Revenue (FBR) has clarified that Federal Excise Duty (FED) does not fall within the definition of “tax expenditure” and has therefore been excluded from the recently issued Tax Expenditure Report 2025.
The report, released this week, presents updated estimates of Pakistan’s tax expenditures for Fiscal Year 2023–24. According to the FBR, total tax expenditure during the period is estimated at Rs2.43 trillion, covering concessions and exemptions in income tax, sales tax, and customs duty.
However, FED – a levy imposed on a specific range of products and services – is treated differently. The FBR explained that unlike general taxes, which often include exemptions, exclusions, credits, or allowances that reduce potential revenue, Federal Excise Duty is a targeted charge designed for selected sectors and activities. Because it is not structured to provide broad-based concessions or preferential treatments, it does not qualify as a tax expenditure under international standards.
“Federal Excise Duty is a separate, focused levy that does not share the characteristics of tax expenditures, such as exemptions or credits,” the report states. “Accordingly, it has not been incorporated into the tax expenditure framework for FY2025.”
The FBR also highlighted that this approach aligns with best practices adopted in many other jurisdictions, where excise duties are considered distinct from mainstream tax concessions. By keeping FED outside the scope of its tax expenditure calculations, the FBR aims to present a clearer and more transparent picture of the government’s revenue forgone through policy-based relief measures.
This clarification underscores the FBR’s ongoing efforts to improve reporting standards and enhance transparency in Pakistan’s fiscal policy. The agency has been issuing tax expenditure reports annually to quantify the revenue impact of tax incentives and exemptions granted by the government.