The salaried class has paid Rs331 billion in income tax during the first eight months of the current fiscal year, a figure that is 1,350% more than the taxes paid by the retail sector, according to a news report.
The total income tax contributions from salaried individuals for the period of July-February were Rs120 billion higher than the same period last year, marking a 56% increase from Rs211 billion collected in the same period of the previous fiscal year.
The government had set a target of collecting an additional Rs75 billion from salaried people for the entire fiscal year 2024-25, but the total collection has already surpassed Rs120 billion, with four months remaining in the fiscal year.
The breakdown of income tax collections revealed that non-corporate sector employees contributed Rs141 billion, an increase of 43%, while corporate sector employees paid Rs101 billion, a 56% increase.
Employees in provincial governments paid Rs57 billion, up 96%, and federal government employees contributed Rs34 billion, a 66% increase.
In stark contrast, retailers, who mostly remain unregistered, paid just Rs23 billion in withholding income taxes on their purchases—an amount 1,350% lower than what salaried individuals contributed.
Despite this, the government has not raised the issue of tax relief for salaried individuals during its recent talks with the IMF. FBR Spokesperson Dr Najeeb Memon stated that the government plans to review taxes on salaried individuals during the upcoming budget exercise.
Additionally, wholesalers and distributors paid Rs16 billion in withholding taxes, even though nearly half of these entities were not registered with the Federal Board of Revenue (FBR).
The government’s attempt to impose a 2.5% withholding tax on traders was aimed at encouraging them to join the tax system. While this measure raised an additional Rs12 billion from traders, it did not achieve its intended goal of broadening the tax base. Consequently, traders passed the extra tax burden onto consumers.
The government’s Tajir Dost scheme also failed, with a significant shortfall in expected revenue. The scheme, which was expected to raise Rs50 billion from retailers, collected only a fraction of this amount.
In its discussions with the IMF, the FBR admitted that traders and jewelers were among the most challenging sectors to tax. The IMF was briefed about the failure of the Tajir Dost scheme, which struggled to expand to 43 cities due to resistance from large traders.
For the current fiscal year, the IMF has set a tax collection target of Rs12.97 trillion for the FBR, but the revenue body has already faced a shortfall of Rs605 billion in the first eight months, despite collecting Rs331 billion from salaried individuals.
The FBR’s tax collection target for March is Rs1.22 trillion, but the revenue body is expected to miss it by a wide margin. As of Sunday, the FBR had collected Rs515 billion, leaving it with a daunting task of generating Rs704 billion within the final week before the Eid holidays.
