Pakistan salaried people’s contribution to the tax net was projected to be five times higher than that of the country’s exporters and retailers in the outgoing financial year 2024-25, a member of the Salaried Class Alliance of Pakistan (SCAP) said on Thursday.
The Federal Board of Revenue (FBR) collected Rs430 billion in revenue in income tax from salaried people in the first 10-month of the outgoing fiscal year 2024-25, said Nasir Hussain Taibani, a member of the SCAP, in a press conference at the Karachi Press Club.
Salaried class: Call for revision of tax slabs, rise in exemption limits
The contribution was estimated to surpass Rs550 billion in the full current fiscal year, compared to Rs75 billion in FY19 and Rs368 billion collected in FY24, he added.
“Salaried people are subject to heavy taxes compared to only Rs100 billion collectively paid by exporters and retailers,” Taibani said.
The group demanded reliefs in the upcoming budget for FY2025-26, claiming the collection of revenue in taxes had reached its optimal level.
“The time has come when the elevated tax rates would start impacting collection of revenue and economic growth, and expedite flight of capital and brain-drain from the country to abroad,” Komal Ali, another member of the SCAP.
Citing Laffer Curve theory at the press conference, Komal Ali said the existing tax rates “are too high” on the income of salaried people in Pakistan.
If the government did not opt for tax cuts and tax credits, the collection of revenue and economic activities would start to decline, she envisaged.
“The higher tax rates will expedite brain-drain of highly skilled and well-educated people, and flight of capital, from Pakistan to abroad.”
Meanwhile, Taibani further said the salaried class paid up to 35% in taxes. In addition to that, a section of the them also paid a 10% surcharge, he added.
“On the other hand, they are subject to indirect taxes on purchase of goods, and health and education fees. This means a big portion of their income is going into taxes, badly impacting their disposable income.”
He recommended the government to reduce the number of income tax slabs back to 2022-23 level for them, cut higher rate of taxes, double the threshold of income tax exempted salary to Rs100,000 a month compared to Rs50,000 a month at present.
Taibani also demanded the government restore tax incentives on investment in products like mutual funds and pension funds, and remove surcharge of 10% on the income tax.
He maintained the government should increase the number of taxpayers in the country through bringing agriculture and retail sectors into the tax net instead further increasing tax rates for the people and the sectors of the economy “already paying heavy taxes”.
Hasnain Ashraf, another member of the alliance, said the power of the salaried class to pay the taxes “has surpassed maximum level, leaving no financing to buy homes and cars”.
The government should rather control its expenditures and fix the loss-making entities being maintained at the cost of the taxpayers, he added.
According to the SCAP, it reached out to almost all the major political parties having representation in the Parliament to raise voice for the salaried class, but “none of them did so”.
The group said it would approach courts of law to fight their tax case if the government avoided giving relief in the upcoming budget to announced on June 10.
“The middle class (middle income groups) has been crushed. While inflation has doubled in the past three years, the minimum taxable income threshold remains stuck at Rs50,000 per month,” the SCAP stated in a press release.
“Continued neglect of this segment [salaried class] is contributing to the country’s worsening brain drain. Emigration of skilled and educated professionals reportedly surged by 119% over the past year, with heavy taxation cited as a key factor,” it read.
The agriculture sector, contributing nearly 20% of the country’s gross domestic product (GDP), contributes less than 1% in tax revenue, according to the SCAP.
“Some landlords and privileged groups enjoy vast exemptions, while wage earners face tax rates as high as 35% with additional surcharge of 10%.”
The alliance expressed concerns for “growing informality in the economy”, where businesses opt to pay salaries in cash to avoid high tax deductions-undermining documentation and long-term development.
The SCAP is comprised of government and private sector employees, such as from the banks, education institutes, media, and corporate enterprises.
