Salaried Class Shoulders Massive Tax Burden as Contribution Surpasses Other Sectors
ISLAMABAD: A recent study on Pakistan’s taxation landscape has highlighted a widening disparity in the tax net, revealing that the salaried class is paying significantly higher taxes—up to 352 percent more—than several other key economic sectors.
The data underscores the growing pressure on formal sector employees who, unlike other segments, have their taxes deducted at source. While the government continues to push for revenue mobilization, the burden remains disproportionately concentrated on the documented workforce.
Widening Tax Inequity According to the findings, the effective tax contribution of the salaried group has far outpaced that of retailers, exporters, and the agricultural sector. Despite being a smaller segment of the overall population, salaried individuals contributed over Rs360 billion in the previous fiscal year, a figure that is projected to rise further following the latest adjustments in tax slabs.
In contrast, sectors such as retail and wholesale, which represent a significant portion of the GDP, contribute a fraction of what is collected from employees’ payrolls. Critics argue that this “easy-to-collect” approach by the Federal Board of Revenue (FBR) is discouraging formal employment and fueling a brain drain of skilled professionals seeking better take-home pay abroad.
FBR Targets and Enforcement The FBR, currently facing a revenue shortfall of over Rs420 billion in the first eight months of the current fiscal year, is under pressure from the International Monetary Fund (IMF) to expand the tax base. However, instead of bringing undocumented sectors into the fold, recent policy shifts have largely focused on increasing rates for existing taxpayers.
“The salaried class is the most compliant yet the most squeezed,” noted a financial analyst. “With inflation eroding purchasing power and tax slabs becoming more aggressive, the middle class is being pushed to the brink.”
Structural Reforms Needed Economists suggest that without meaningful structural reforms—including the effective taxation of retail, real estate, and agriculture—the fiscal deficit will continue to grow. The current reliance on withholding taxes from salaries is seen as a short-term fix that ignores the deeper systemic issues of tax evasion in the undocumented economy.
As the government prepares for the upcoming budget, there are growing calls from trade unions and professional associations to revise the tax brackets and provide much-needed relief to the country’s workforce.