ISLAMABAD: The scale of tax and financial irregularities detected in the Federal Board of Revenue (FBR) declined sharply during fiscal year 2024-25, with the Auditor General of Pakistan (AGP) reporting irregularities of Rs242 billion, down from Rs662.7 billion a year earlier, indicating a significant improvement in tax administration despite persistent weaknesses in enforcement and recovery.
A comparison of the AGP’s audit reports for audit years 2024-25 (covering FY2023-24) and 2025-26 (covering FY2024-25) shows that the value of audit observations fell by around Rs421 billion, or nearly 63.5 percent.
The most notable improvement came in income tax, where irregularities dropped from Rs457.1 billion to about Rs163 billion. The largest single issue remained the non-realisation of super tax, but the amount declined from Rs167.9 billion involving more than 1,600 cases to Rs117 billion in 527 cases.
Under-assessment of income tax due to inadmissible expense claims also showed a substantial improvement, falling from Rs149.6 billion to Rs25 billion. Likewise, unrealised minimum tax declined from Rs22.9 billion to Rs15 billion, while non-apportionment of expenses was reported at Rs2 billion, a category that had not figured as prominently in the previous year’s report.
Sales tax and Federal Excise Duty (FED) irregularities also registered a significant decline, falling from Rs186.7 billion to around Rs60 billion.The biggest improvement was recorded in fake or inadmissible input tax credits claimed on invoices issued by suspended or blacklisted suppliers. The amount fell dramatically from Rs123.6 billion to Rs42 billion, although it still remained the single largest sales tax irregularity.
Losses from non-realisation of sales tax on taxable supplies were limited to Rs13 billion, compared with Rs36 billion reported earlier under deliberate suppression of sales. Similarly, losses due to non-apportionment of input tax declined from Rs8.5 billion to Rs2 billion.
In the customs sector, audit observations also pointed to better compliance. Overall customs-related irregularities declined from Rs18.9 billion to about Rs18 billion.While the value of confiscated goods and vehicles awaiting disposal remained high at Rs13 billion, it was slightly higher than the Rs12.6 billion reported previously under undisposed confiscated goods. Meanwhile, losses due to misclassification and undervaluation of imports stood at Rs3.6 billion, compared with Rs1.2 billion previously, indicating that this particular area has deteriorated despite overall improvement.
Similarly, inadmissible customs exemptions and concessions dropped from Rs1.6 billion to Rs700 million, while failure to recover surcharge on warehoused goods accounted for another Rs809 million.The number of audit observations also increased to 193 field office observations in the latest report, reflecting broader audit coverage, although the financial impact of irregularities declined substantially.
