Pakistani Salaried Class is Actually Paying More Tax Than Before Despite Govt’s “Reduction” in Slabs

Salaried workers have ended up paying more in taxes this year despite the government’s promise of relief. In the first two months of the current fiscal year, their income tax contributions jumped to Rs. 85 billion, about Rs. 15 billion, or 21% higher than the Rs. 70 billion they paid during the same period last year. Officials told The Express Tribune that the increase shows how the government’s minor reduction in tax rates in the federal budget failed to ease the financial strain on this segment. Finance Minister Muhammad Aurangzeb reportedly admitted that the relief was limited, pointing out that the state had virtually no fiscal room to offer meaningful concessions. The 21% jump in income tax collections this year comes on top of an already steep rise last year, when the salaried class saw their payments surge by more than half after sharp hikes in tax rates. For employees whose taxes are deducted at source on gross salaries, without the option of adjusting expenses, these record-high contributions have greatly reduced their take-home pay and strained household budgets. During the last fiscal year alone, salaried workers paid Rs. 555 billion in income taxes, which is an increase of 51%, or Rs. 188 billion more compared to the year before. In the latest budget, the government slightly eased the burden for those earning up to Rs. 3.2 million annually, claiming it would provide Rs. 56 billion in relief. But when weighed against actual collections, that concession amounted to little more than a token gesture. Taxation data reveal that income tax contributions rose across nearly all categories of employees last fiscal year. Workers in the non-corporate sector paid Rs. 41.5 billion, up by Rs. 8.5 billion or 26%, while corporate sector employees contributed Rs. 20 billion, an increase of Rs. 5.2 billion, also 26% higher than the year before. Provincial government employees paid close to Rs 10.5 billion in taxes, marking a rise of Rs. 626 million or 6%. Federal government staff contributed Rs. 7.6 billion, higher by Rs. 552 million or 8%, according to provisional figures compiled by the Federal Board of Revenue (FBR) for July and August. The government’s attempt to generate extra funds through a new tax on wealthy pensioners has so far failed to deliver. A levy was introduced on annual pensions exceeding Rs. 10 million, but in the first two months, the FBR managed to collect only Rs. 180 million. Sources said the annual revenue may barely cross Rs. 1 billion, far below expectations. Meanwhile, parliamentary committees are scrutinising the unusually high pay packages of Securities and Exchange Commission of Pakistan (SECP) officials. The Auditor General of Pakistan (AGP) has already flagged serious concerns over a steep salary hike for SECP commissioners and the chairman, which was endorsed by the regulator’s board on management’s recommendation.