fbpx
Wednesday, November 6, 2024
HomePakistanPakistan’s voiceless Salaried class Taxes Rs368 billion in last fiscal year

Pakistan’s voiceless Salaried class Taxes Rs368 billion in last fiscal year

-

In the last fiscal year, Pakistan’s salaried workers paid a record Rs368 billion in income taxes, surpassing what exporters and retailers combined paid by 232%.

Despite these substantial contributions, the government and the International Monetary Fund (IMF) deemed them insufficient. Consequently, starting from July, the new budget raises income tax rates for salaried workers again, potentially reducing take-home pay for many starting in August.

According to the Federal Board of Revenue (FBR), salaried workers contributed Rs367.8 billion in taxes during fiscal year 2023-24, marking a 39% increase from the previous year, amounting to an additional Rs104 billion.

The additional taxes paid by salaried workers nearly matched the combined Rs111 billion paid by the wealthiest exporters and influential traders. Salaried workers ranked fourth in major contributors to withholding taxes, following contractors, bank depositors, and importers.

For fiscal year 2024-25, the government has increased income tax rates on salaried incomes and added a 10% surcharge on the highest tax bracket of 35%. The FBR anticipates collecting an additional Rs85 billion from salaried workers this fiscal year, projecting total contributions to exceed Rs450 billion by June next year.

Government officials state that the IMF views salaried workers as a dependable revenue source for the FBR. An anonymous senior bureaucrat revealed that Nathan Porter, IMF’s Mission Chief for Pakistan, indicated any reduction in salaried tax rates depends on the government’s ability to raise revenue from other sources.

Furthermore, in addition to direct income tax, the salaried class faces various withholding taxes on utilities such as electricity, telephone, internet bills, and on international transactions via credit and debit cards.

According to FBR data, the highest income tax collections came from contractors, savings account holders, importers, salaried individuals, electricity bills, telephone and mobile users, and dividend income.

In contrast, exporters and retailers together paid Rs257 billion less in taxes than the salaried class last fiscal year, with their combined income tax payment amounting to Rs111 billion—232% less than what salaried individuals contributed.

Despite earning $30.6 billion, exporters contributed only Rs93.5 billion in taxes, marking a 27% increase of Rs20 billion from the previous year. Until June, exporters were subject to a fixed income tax rate of 1% of their gross receipts, replaced in the recent budget with a standard tax regime.

The FBR aims to generate an additional Rs125 billion in income taxes from exporters this fiscal year, though their total contributions would still be half of what salaried individuals pay in income taxes.

Similarly, retailers paid Rs17.3 billion in income tax under a 0.5% advance tax on sales last year, despite constituting about 19% of the economy. Many traders remain excluded from the new income tax regime recently implemented by the government.

Tax collections from contractors and service providers surged by 27% to Rs498 billion last fiscal year, marking the highest contribution to withholding taxes, including payments from salaried individuals under contract-based services.

Income from profit on debt increased by 52% to Rs488 billion due to higher interest rates, while importers contributed Rs381 billion in income tax on various imported goods, making them the third-largest contributor to withholding taxes.


LATEST POSTS

Show Cause Notice to Hafiz Naeemur Rehman from Election Commission

The Election Commission of Pakistan addresses code of conduct breaches in the by-elections. On Tuesday, the ECP issued a...

Pakistan’s First National Sex Offenders Register Unveiled

Pakistan Unveils First National Sex Offenders Register In a significant step toward combating sexual violence and abuse, the Ministry of...

Crackdown on Smuggled Fuel- Sindh Closes 176 Petrol Stations to Ensure Quality

In a decisive move, the Sindh government has ordered the closure of 176 petrol stations across the province for...

Most Popular