The salaried class in Pakistan has paid a record Rs391 billion in income tax during the first nine months of the current fiscal year, marking a significant disparity in contributions compared to other sectors.Â
According to a news report, salaried individuals now contribute 1,420% more in taxes than retailers, who paid just Rs26 billion. This comes as the salaried class bears a disproportionate share of the country’s tax burden, contributing nearly 10% of the total income tax collected.
According to data from the Federal Board of Revenue (FBR), income tax payments from the salaried class have surged by 56% compared to the previous fiscal year, with Rs140 billion already collected, surpassing the original target of Rs75 billion. Despite this increase, the salaried class continues to face taxes on gross income without adjustments for expenditures, making their financial strain more pronounced.
The total income tax collected during the July-March period of this fiscal year amounted to Rs4.1 trillion. Of this, Rs391 billion was paid by salaried individuals, up from Rs368 billion in the same period last year. Meanwhile, the non-corporate sector paid Rs166 billion, while corporate sector employees contributed Rs117 billion.
Retailers, on the other hand, have paid just Rs26 billion in withholding taxes, far below the contribution of salaried individuals. In contrast to the Rs391 billion paid by salaried persons, the tax paid by retailers is just a fraction of the amount, highlighting the disparity in tax contributions.
According to the report, the government has not raised the issue of tax relief for salaried class during recent talks with the International Monetary Fund (IMF) despite significant increases in tax collection from them. The IMF is expected to review Pakistan’s budget in May, and the government may face pressure to present alternative fiscal measures to balance the tax burden.
The government’s recent changes to the tax slabs have impacted the middle and upper-middle-income groups, with the highest tax rate of 35% now applying to those earning Rs443,000 a month, and a 10% surcharge bringing the total tax rate to 38.5%.
While the government imposed higher taxes on traders, including a 2.5% withholding tax, many remain unregistered with the FBR, and much of the tax burden has been passed on to consumers.
The FBR has struggled to meet its target, facing shortfalls of Rs714 billion in its tax collection for the first nine months of the fiscal year. The target has been revised downward from Rs12.97 trillion to Rs12.3 trillion, with the final collection expected to fall short due to lower-than-expected economic growth and inflation.
