ISLAMABAD: The salaried class contributed a staggering Rs331 billion in income tax during the first eight months of the current fiscal year—1,350% more than retailers—but the government has not sought any relief for them from the International Monetary Fund (IMF).
According to official data, tax contributions from salaried individuals surged by Rs120 billion (56%) compared to last year, with collections reaching Rs331 billion between July and February. Despite this heavy tax burden, which is deducted from gross income without expenditure adjustments, the government did not address the issue with the IMF during recent negotiations.
In contrast, retailers, mostly unregistered, contributed only Rs23 billion in withholding income tax, while wholesalers and distributors paid just Rs16 billion. The government had imposed a 2.5% withholding tax on traders to push them into the tax net, but instead of broadening the base, traders passed the burden onto consumers.
The Tajir Dost scheme, aimed at bringing 10 million traders into the tax net, has also failed. The FBR admitted to the IMF that both traders and jewelers remain difficult to tax and that large traders actively discouraged smaller ones from joining the scheme.
Meanwhile, the government increased the tax burden on salaried individuals last June by reducing tax slabs, disproportionately affecting middle and upper-middle-income groups. The maximum tax rate of 35% now applies at Rs500,000 monthly income, with an additional 10% surcharge, pushing the total tax rate to 38.5%.
Despite high tax contributions from salaried individuals, the government prioritized negotiating tax reductions for the real estate sector with the IMF—a request that was rejected.
For the current fiscal year, the FBR faces a tax target of Rs12.97 trillion but has already recorded a shortfall of Rs605 billion. The March tax target stands at Rs1.220 trillion, which officials expect to miss by a wide margin. As of Sunday, the FBR had collected Rs515 billion, leaving it with a challenging task of generating Rs704 billion within a week before the Eid holidays.
