The Federal Board of Revenue (FBR) significantly reduced the scale of tax and financial irregularities during fiscal year 2024-25, with the latest audit report showing a sharp improvement across income tax, sales tax and customs.
According to the Auditor General of Pakistan (AGP), audit observations involving tax irregularities totalled Rs242 billion during the year, compared with Rs662.7 billion in the previous fiscal year. The decline of about Rs421 billion, or nearly 63.5 percent, suggests stronger tax compliance and better administration, although auditors said several long-standing issues still require attention.
The findings are based on the AGP’s audit report for 2025-26, which covers FY2024-25, and its previous report for 2024-25 covering FY2023-24.
Income tax sees biggest improvement
Income tax accounted for the largest reduction in audit observations.
Irregularities in this category fell to around Rs163 billion from Rs457.1 billion a year earlier.
The non-recovery of super tax remained the single biggest issue, but the amount involved dropped to Rs117 billion across 527 cases. In the previous audit, unpaid super tax stood at Rs167.9 billion involving more than 1,600 cases.
Auditors also reported a sharp decline in under-assessed income tax resulting from inadmissible expense claims. The amount fell from Rs149.6 billion to Rs25 billion. Unrealised minimum tax also decreased to Rs15 billion from Rs22.9 billion, while non-apportionment of expenses accounted for Rs2 billion in observations.
Sales tax irregularities shrink
Sales tax and Federal Excise Duty (FED) irregularities also fell significantly, dropping to around Rs60 billion from Rs186.7 billion.
The biggest improvement came in fake or inadmissible input tax credits claimed on invoices issued by suspended or blacklisted suppliers. Although this remained the largest single sales tax issue, the amount involved declined sharply from Rs123.6 billion to Rs42 billion.
Losses linked to the non-recovery of sales tax on taxable supplies dropped to Rs13 billion from Rs36 billion. Irregularities related to the non-apportionment of input tax also declined from Rs8.5 billion to Rs2 billion.
The customs sector also recorded an overall improvement, with audit observations easing slightly to about Rs18 billion from Rs18.9 billion.
However, not every area improved. Losses caused by the misclassification and undervaluation of imported goods rose to Rs3.6 billion from Rs1.2 billion, making it one of the few categories that worsened during the year.
The value of confiscated goods and vehicles awaiting disposal remained high at Rs13 billion, compared with Rs12.6 billion in the previous audit.
Meanwhile, inadmissible customs exemptions and concessions fell to Rs700 million from Rs1.6 billion, while auditors also identified Rs809 million in unrecovered surcharges on warehoused goods.
The latest report included 193 audit observations from field offices, more than the previous year. Despite the broader audit coverage, the overall financial impact of irregularities declined substantially, indicating improvements in tax administration while highlighting the need for stronger enforcement and more effective recovery of outstanding dues.
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