Salaried Class Paid Staggering 232% More Taxes Than Exporters and Retailers in FY24

Pakistan’s salaried class paid a record Rs. 368 billion in income taxes, 232 percent more than taxes paid by exporters and retailers in FY2023-24. Federal Board of Revenue (FBR) data reveals that in FY24, salaried workers paid Rs. 367.8 billion in taxes, Rs. 104 billion more than in FY23. This additional income tax nearly matched the combined Rs. 111 billion paid by the wealthiest exporters and influential traders. Salaried individuals were the fourth-largest contributors to withholding taxes, following contractors, bank depositors, and importers, reported Express Tribune. The federal government has further hiked income tax rates for salaried persons and imposed a 10 percent surcharge on the highest income tax bracket of 35 percent for FY25. The FBR anticipates generating around Rs. 85 billion more from salaried people this fiscal year, pushing their total contributions to over Rs. 450 billion by June next year. The IMF’s stance is that salaried individuals are the most reliable source for guaranteed revenue collection and sees any potential reduction in income tax rates for salaried individuals to the government’s ability to generate revenue from other sources. The lender’s demands are placing an undue burden on the salaried class, which lacks the influence of exporters and retailers. The salaried class faces other withholding taxes on electricity bills, telephone, internet connections, and international transactions using credit and debit cards. The highest income tax collections came from contractors, saving account holders, importers, salaried individuals, and utility users. Exporters and retailers paid Rs. 257 billion less in taxes than the salaried class, with their total income tax amounting to Rs. 111 billion last fiscal year. Exporters, who earned $30.6 billion, contributed Rs. 93.5 billion in taxes, a 27 percent increase from the previous year. The government has now shifted exporters from a fixed-income tax regime to a normal tax regime to generate an additional Rs. 125 billion in income taxes this fiscal year. Retailers paid Rs. 17.3 billion last fiscal year. Meanwhile, tax collection from contractors and service providers rose 27 percent to Rs. 498 billion last fiscal year, the highest contribution to withholding taxes. The collection on profit from debt increased by 52 percent to Rs. 488 billion due to higher interest rates, while importers paid Rs. 381 billion. FBR collected Rs. 130 billion in income taxes from electricity consumption, a tax primarily aimed at non-filers with monthly bills exceeding Rs. 25,000. However, income tax return filers living in rented properties are also subject to this tax. Another Rs. 100 billion was collected from telephone and mobile phone bills.