Zafar Iqbal
During the first half of the current fiscal year, salaried individuals in Pakistan paid an estimated 266 billion rupees in taxes, roughly double the amount contributed by the real estate sector. This stark imbalance has reignited a long-standing grievance among salaried workers who argue, with justification, that they are far from being the wealthiest segment of society. Yet they remain among the most heavily and consistently taxed, largely because their incomes are documented, traceable, and easy for the state to tax at source.
What makes this situation more troubling is the uneven experience within the salaried class itself. Those employed by the government, who draw salaries directly from the public exchequer, have often benefited from annual pay raises that in many cases exceeded the rate of inflation. In contrast, salaried employees in the private sector have faced a very different reality. Since the Covid-19 pandemic, Pakistan’s economy has struggled with low growth, business uncertainty, and a sharp tightening of monetary and fiscal policy. These contractionary measures, largely implemented to meet conditions under the ongoing IMF programme, have left private-sector workers with stagnant wages, reduced job security, and shrinking purchasing power.
This divide matters because government employees make up only a small fraction of the labour force. Roughly 7 percent of employed Pakistanis earn salaries paid by the state. The remaining 93 percent, which includes private-sector salaried workers, informal labourers, small traders, and the self-employed, have borne the brunt of economic adjustment. The impact is visible in national data, with poverty levels now exceeding 42 percent. For most households, rising prices of food, energy, and basic services have far outpaced income growth, pushing millions closer to economic distress.
The comparison with the real estate sector further highlights structural flaws in Pakistan’s tax system. Despite being one of the largest and most lucrative sectors of the economy, real estate contributed only about half of what salaried individuals paid in taxes during the same period. Part of the explanation lies in how taxation powers are divided. Urban property taxes and agricultural income taxes fall under provincial jurisdiction, while the Federal Board of Revenue mainly collects withholding and capital gains taxes on property transactions. This fragmented system creates gaps, weak enforcement, and opportunities for under-taxation.
Beyond administrative issues, there is a widely held belief, supported by considerable evidence, that real estate has long served as a preferred destination for black money. Estimates suggest that undocumented economic activity may account for at least half of Pakistan’s formal economy, and property transactions have historically played a central role in absorbing untaxed wealth. Recent reforms introduced under IMF conditionality have tightened documentation requirements and raised transaction costs, leading to a noticeable slowdown in property sales and purchases. This slowdown has also contributed to lower tax collections from the sector, though it does not fully justify the persistent disparity.
At the same time, Pakistan’s investment patterns have begun to shift. In 2025, reports indicate a growing preference for gold and the stock market over traditional productive investment. The rising appeal of gold is not unique to Pakistan. Globally, it reflects growing uncertainty in the international financial system. US-led sanctions on multiple countries, along with the Trump administration’s aggressive tariff policies against China and even key European allies, have weakened confidence in the US dollar. As a result, several countries, including China and India, have increased their gold holdings as a hedge against geopolitical and financial risk.
In Pakistan, this global trend intersects with local vulnerabilities. Although the rupee-dollar exchange rate has appeared relatively stable in recent months, this stability masks deeper weaknesses. It does not reflect the declining dominance of the US dollar globally, nor does it signal genuine strength in Pakistan’s external position. Despite higher remittance inflows, foreign exchange reserves remain heavily dependent on borrowing from multilateral institutions and a small group of friendly countries. What Pakistan lacks is a sustainable source of external stability in the form of a trade surplus driven by competitive exports.
The stock market presents another complex picture. Successive finance ministers, including the current one, have pointed to strong stock market performance as evidence of economic resilience. Critics, however, argue that these gains may say less about underlying economic health and more about structural distortions, including relatively low taxation on capital market activities compared to the region. While stock prices may rise, this does not automatically translate into broader economic well-being.
It is also important to recognise who actually participates in the stock market. In Pakistan, stock market investors are few in number, especially when compared to other emerging economies. Participation is largely confined to wealthier individuals and institutional players. Vulnerable households, lower-income groups, and even most middle-income earners are effectively absent. As a result, the strength or weakness of the stock market cannot be seen as a reliable indicator of inclusive growth. Rising poverty levels make it clear that gains in financial markets are not trickling down to the majority of citizens.
In this environment, the growing preference for gold and stocks is unlikely to support higher productivity or long-term economic transformation. These assets may preserve wealth for those who already have it, but they do little to generate jobs, expand industrial capacity, or raise incomes across society. With monetary and fiscal policies remaining severely contractionary, businesses are reluctant to invest in new projects, expand operations, or take risks that could boost growth.
Ultimately, the burden of adjustment continues to fall disproportionately on documented and compliant taxpayers, especially salaried individuals in the private sector. This imbalance not only undermines perceptions of fairness but also weakens trust in the tax system itself. A system seen as unjust encourages avoidance, informality, and resistance rather than voluntary compliance.
To break this cycle, the government must rethink its approach. While engagement with the IMF remains unavoidable, there is room to negotiate a more balanced policy mix. Easing contractionary policies, even gradually, could help revive investment in productive sectors, stimulate job creation, and improve living standards. At the same time, meaningful tax reform is needed to broaden the base, reduce reliance on salaried workers, and ensure that wealthier and under-taxed sectors contribute their fair share.
Without such changes, Pakistan risks entrenching an economic model where growth is narrow, inequality deepens, and the most compliant citizens continue to shoulder an unfair share of the burden.
