Pakistan’s salaried class paid Rs264.3 billion in income tax in the just-ended fiscal year – a sum that is nearly 200% more than the combined taxes paid by the country’s exporters and highly undertaxed retailers.
Data compiled by the Federal Board of Revenue (FBR) showed that during the fiscal year 2022-23, salaried persons paid Rs264.3 billion in taxes. The amount paid by the salaried class in taxes at up to a 35% rate was over Rs75 billion or 40% higher than the preceding year.
The salaried people were the fourth-largest contributors to the withholding taxes after contractors, bank depositors, and importers. The FBR has yet to release these figures officially.
In the last budget, the government had increased the taxes of the salaried class, which also became a reason for higher tax collection. Despite heavy taxation of the salaried class, coupled with history’s record highest inflation, the government again increased taxes on the salaried people earning more than Rs200,000 a month in this budget. Meanwhile, around 5,000 retailers were released by relaxing their registration conditions.
During the last fiscal year, the FBR collected over Rs2 trillion on withholding taxes, equal to 61% of the total income tax the FBR generated in the previous fiscal year. However, the details suggested that the withholding tax collection, particularly at double rates from the non-filers of the returns, has become an easy source of revenue collection for the FBR.
Chasing existing taxpayers for more while allowing the informal sector to grow is akin to killing the goose that lays the golden egg, according to the Salaried Class Alliance. The maximum income tax was collected from contractors, saving account holders, importers, salaried persons, electricity bills of the non-filers, telephone & mobile phones users, and dividend income, as shown by details compiled by the FBR. The other major revenue spinners were taxes on the purchase and sale of properties, exports, foreign income fees, brokerage commissions, and registration of cars.
However, according to the provisional numbers, exporters and retailers pay Rs175 billion less tax than the salaried class. The total income tax paid by exporters and retailers was Rs89.5 billion in the last fiscal year, which was Rs175 billion or 196% less than the income tax paid by salaried persons.
