In the last fiscal year, the salaried class in Pakistan paid a significant amount of Rs264.3 billion in income tax. This amount is almost 200% more than the combined taxes paid by the country’s exporters and undertaxed retailers.
Data from the Federal Board of Revenue (FBR) revealed that salaried individuals contributed a substantial portion of the total tax collection, even though they faced higher taxation compared to other sectors. The salaried people paid their taxes at rates of up to 35%, and the amount they paid was 40% higher than the previous year.
Interestingly, the salaried class ranked fourth in terms of contributors to withholding taxes, following contractors, bank depositors, and importers. However, it’s worth noting that the FBR has not officially released these figures yet.
Despite the heavy tax burden on salaried individuals and the country’s record-high inflation, the government further increased taxes on salaried individuals earning over Rs200,000 per month in the recent budget. At the same time, around 5,000 retailers were exempted from certain tax conditions.
The FBR collected over Rs2 trillion through withholding taxes during the last fiscal year, accounting for 61% of the total income tax collected. This indicates that withholding tax, particularly at double rates from non-filers, has become an essential revenue source for the FBR.
The Salaried Class Alliance expressed concerns about the situation, stating that focusing on increasing taxes for existing taxpayers while allowing the informal sector to grow could harm the overall economy.
Among the major contributors to income tax were contractors, savings account holders, importers, salaried individuals, electricity bills of non-filers, telephone and mobile users, and dividend income.
On the other hand, exporters and retailers combined paid Rs175 billion less in taxes compared to the salaried class. Their total income tax contribution was Rs89.5 billion, significantly lower than the income tax paid by salaried individuals.
