Editorial
Pakistan’s tax collection system is fundamentally flawed, disproportionately burdening those already contributing, while failing to widen the tax base. The Federal Board of Revenue’s (FBR) persistent inability to bring untaxed sectors like agriculture and real estate into the fold has left the salaried class, banks, and business individuals carrying most of the weight. It’s telling that the salaried class, which pays 38.5% of its income in taxes, is the third-largest contributor, expected to pour in Rs500 billion by June 2025—more than the combined input of the textiles and retail sectors.
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This glaring imbalance is worsened by a tax structure that applies levies on gross salaries, while businesses benefit from deductions on net income. The salaried class has seen almost all tax rebates and credits stripped away, deepening its financial strain. Meanwhile, privileged sectors, including the judiciary and civil and military bureaucracy, continue to enjoy tax exemptions—a clear violation of Article 25 of the Constitution, which mandates equality before the law.
Despite paying hefty taxes, the salaried class gets little in return: skyrocketing health, education, and living costs force many to rely on private services, as state provisions are woefully inadequate. Globally, high-tax countries reinvest in public welfare, but in Pakistan, tax revenues often fund bureaucratic luxury and debt repayments.
A robust middle class is essential for economic vitality, yet Pakistan’s approach risks hollowing it out. While the finance minister has hinted at upcoming relief, meaningful reforms are needed—like raising the minimum tax threshold to Rs3.6 million annually—to prevent further impoverishment. Without decisive action, the government risks pushing even more of the middle class into poverty, weakening the backbone of the national economy.
