The salaried class in Pakistan continues to shoulder a disproportionate tax burden. Despite the downward revision of income slabs under the Finance Act 2025, the Federal Board of Revenue (FBR) collected a record Rs. 138 billion from salaried taxpayers in the first quarter of fiscal year 2024-25. This marks a sharp rise from Rs. 110 billion in the same period of 2023-24.
During July to September 2024-25, the FBR generated nearly Rs. 20 billion more than the previous year, underscoring an increasing reliance on salaried individuals to meet tax targets.
Sharp Rise in Tax Contribution from Salaried Workers
Data shows that personal income tax (PIT) collected from salaried citizens now stands at Rs. 1,936 billion, accounting for 29 percent of total PIT collection. Just a few years ago, this share was merely 10 percent. Over six fiscal years, the portion paid by salaried taxpayers has steadily climbed: 10 percent in 2018-19, 12 percent in 2019-20, 12 percent in 2020-21, 19 percent in 2021-22, 25 percent in 2022-23, and 29 percent in 2024-25.
Meanwhile, overall FBR revenue nearly tripled from Rs. 3,829 billion in FY2018-19 to Rs. 11,744 billion in FY2024-25. Yet the salaried class’s contribution remains modest at 5 percent of total revenue, showing that individual taxpayers are paying significantly more even as the tax net remains narrow.
Unequal Burden and Shrinking Relief
Personal income taxes, both salaried and non-salaried, now make up only 16 percent of FBR’s total revenue, compared with 19 percent in FY2018-19. This indicates that while total tax intake is growing, the contribution from salaried professionals has surged without corresponding reform in other sectors.
Experts argue that this increase represents not efficiency but inequity. The apparent growth in FBR’s tax-to-GDP ratio—from 8.83 percent to 10.33 percent, has come mainly through higher deductions from existing taxpayers rather than an expanded tax base.
Tax Slab Changes and Their Fallout
The most striking policy change came with the drastic reduction of the upper-income slab. Incomes above Rs. 4.1 million annually are now taxed at 35 percent—previously, the rate applied only to incomes above Rs. 75 million. Such an extreme shift, implemented while inflation rises, has no global precedent.
By taxing professional incomes at such high rates, the government risks driving skilled talent abroad. Highly trained workers, already burdened by inflation and indirect taxes, face eroded purchasing power and diminishing living standards. Many are reportedly seeking opportunities overseas, citing unsustainable taxation.
A Warning for Policymakers
Economists caution that celebrating higher tax figures without structural reform is misguided. They emphasize that this surge in collection reflects the “silent sacrifice” of salaried individuals rather than genuine fiscal achievement. Without broadening the tax net and easing pressure on compliant taxpayers, the policy risks stifling economic growth.
Experts warn that this imbalance represents not reform but self-inflicted economic damage. The salaried class, they stress, has become the backbone of national revenue, yet continues to bear an unjust and unsustainable load.
