ISLAMABAD: The Federal Board of Revenue collected over Rs518 billion in salary tax during the first eleven months of fiscal year 2025-26. It showed a decline of around 6 percent year on year. Officials reported collections of Rs518.48 billion compared to Rs555 billion in the same period last year.
Decline in salary tax collection
The decline comes as salaried individuals continue to face heavy taxation pressure in Pakistan. Inflation and rising living costs have reduced disposable income. Meanwhile, calls for tax relief have increased across different sectors. However, fiscal constraints continue to limit policy space for major cuts. Authorities expect revenue pressures to persist in the coming budget cycle.
Long-term trend and fiscal pressure
Despite the recent drop, salary tax collection has shown strong growth over the past few years. It reached Rs605.59 billion in fiscal year 2024-25. Earlier, it stood at Rs152 billion in 2020-21 and rose steadily in subsequent years. The data shows expanding compliance among salaried earners. It also reflects rising taxable income in the formal sector. Tax analysts say fluctuations may come from changing employment trends.
Economic slowdown and adjustments in income levels also play a role. Moreover, higher inflation has affected real purchasing power. The government continues to rely heavily on salaried taxpayers for stable revenue. Therefore, policymakers face pressure to balance relief with fiscal needs. Future budgets may keep tax rates unchanged due to revenue demands.
Analysts expect continued debate on fairness in salary taxation. Overall, the trend highlights structural challenges in Pakistan’s tax system. Officials say reforms are under consideration to broaden the tax base and improve compliance while easing burden on salaried class in coming fiscal year amid ongoing economic adjustment measures in Pakistan economy.
