Zulfiqar Ali, Shahzeb Afzal, Shujaat Mir (Kashmir Investigation Team)
MUZAFFARABAD: The Inland Revenue Department of Azad Kashmir has generated the revenue of Rs 52 billion till March 31, 2025, against the set target of Rs 75 billion for the current fiscal year.
With Rs 23 billion reaming to achieve the mark, the Azad Kashmir government still have three months in the fiscal year 2024-25, which will end on June 30.
Officials of the revenue department told Kashmir Digital that this tax collection has been made even though this year, the tax revenue on electricity, which was an important source in the past, was almost negligible.
From July 2024, electricity rates for domestic and commercial consumers were reduced significantly, and all taxes were abolished. The burden of implementing the new rates and abolishing taxes was borne by the government of Pakistan, for which it has allocated Rs108 billion in its budget.
However, apart from the industries, there was no change in the electricity rates of hotels, guesthouses and petrol pumps, nor were their taxes abolished.
The total tax collection during the last financial year was Rs 59.5 billion, of which Rs 16 billion was received in the form of electricity tax and expensive tariffs.
According to officials of the Inland Revenue Department, there has also been a significant decline in tax revenue from cigarette companies this year. “Last year, Rs 1.25 billion was received from the cigarette sector, while this year, only Rs 270 million has been received till March 31, 2025,” the official said.
The reason for this decline is the government’s actions to prevent the sale of fake and untaxed cigarettes.
According to officials, the Azad Kashmir government did not approve the federal finance bill, due to which there was a loss of revenue of about Rs1 billion.
Despite all these difficulties, the authorities are hopeful that the target of Rs 70 billion will be achieved by June 30, which is Rs 10 billion more than the total revenue of last year.
Currently, about 4,100 salaried employees and 23,000 ordinary citizens are registered as taxpayers in Azad Kashmir.
Non-development budget and revenue details
Azad Kashmir’s non-development budget for the fiscal year 2024–25 is Rs 220 billion, with a deficit of Rs 19 billion. To meet this deficit, the federal government is providing a variable grant of Rs 105 billion.
The government has set a target of Rs 96 billion in revenue from local sources, of which Rs 75 billion is expected to be collected from taxes alone. However, the actual tax revenue will likely be limited to Rs 70 billion, taking the total local revenue to Rs 91 billion.
The budget documents do not mention the revenue from the sale of flour, which is Rs 14.5 billion. If this is included, the revenue could reach Rs 210.5 billion.
Questions on unclear expenditure in budget
The non-development budget for Azad Kashmir has been estimated at Rs 220 billion, however, according to the details of the Finance Department, Rs 132 billion has been allocated for salaries, pensions and allowances, Rs 20 billion for miscellaneous grants, Rs 41 billion for wheat procurement and subsidy, and Rs 1.34 billion for the purchase of medicines.
This totals Rs 194.34 billion, after which there is no clear detail of expenditure of about Rs 26 billion. Questions are being raised on this lack of transparency, and the demand for transparency in financial matters is gaining momentum.
Proposal to waive tax penalty
On the other hand, the Inland Revenue Department has suggested to the government that the penalty of Rs 10,000 on those who file tax returns late from the next financial year be abolished, so that more people can file returns and become part of the tax system.
