Income tax payments from Pakistan’s salaried class increased sharply during the first seven months of the current fiscal year, underscoring the growing burden on a relatively small group of taxpayers. Provisional figures show that salaried individuals contributed Rs. 315 billion in income tax between July and January, compared to Rs. 285 billion in the same period last year, reflecting a rise of Rs. 30 billion or more than 10 percent.
Data compiled by the Federal Board of Revenue indicates that tax collected from salaried employees in both public and private sectors remained more than twice the amount generated from the real estate sector during the same timeframe. The reported figure does not include book adjustments or taxes paid by certain contractual employees under Section 153-B of the Income Tax Ordinance.
Despite forming a limited portion of the population, salaried taxpayers continue to bear a disproportionate share of total tax revenues as authorities focus on extracting more from existing filers rather than expanding the overall tax base. On average, salaried individuals pay close to 38 percent of their gross income in taxes, a rate significantly higher than those in neighboring countries and far above contributions from sectors such as real estate and retail.
This rising tax pressure has coincided with an ongoing outflow of skilled professionals. Official migration data shows that out of more than 760,000 Pakistanis who left the country last year, over 254,000 were classified as skilled, highly skilled, or highly qualified. These included more than 222,000 skilled workers, nearly 14,000 highly skilled professionals, and over 18,000 highly qualified individuals. The departures also included thousands of chartered accountants and doctors.
Economists warn that Pakistan has so far managed to avoid default largely due to remittances sent by overseas Pakistanis, even as key economic indicators weaken. Exports declined by 7 percent during the first seven months of the fiscal year, while foreign direct investment dropped by nearly half in the first half of the year.
Government officials, however, reject the narrative of large-scale professional flight. The finance minister recently stated that Pakistan earns between $4 and $5 billion annually from information technology exports, suggesting that skilled workers are still contributing domestically. He also noted that income tax for individuals earning Rs. 100,000 per month was reduced from 5 percent to 1 percent, while acknowledging that relief for higher-income earners remains constrained under the IMF programme.
Sector-wise figures show that non-corporate salaried employees paid the largest share at Rs. 139 billion, registering a 14 percent increase year-on-year. Corporate sector employees contributed Rs. 100 billion, up 16 percent. Provincial government employees paid Rs. 44 billion, reflecting an 8 percent decline, while federal government employees contributed Rs. 31.5 billion, marking a 9 percent increase.
A new tax imposed on wealthy pensioners, applicable to annual pensions exceeding Rs. 10 million for retirees under the age of 70, generated only Rs. 30 million during the first seven months, indicating minimal revenue impact.
Efforts by the FBR to broaden the tax base have faced setbacks, with several reform measures rolled back following resistance. Although the FBR leadership has pledged to identify influential individuals obstructing enforcement, progress remains limited.
Tax collection from the real estate sector showed mixed trends. Withholding tax on plot sales rose by 63 percent to Rs. 106 billion, while collections on plot purchases declined by 29 percent to Rs. 47 billion after tax rate reductions for buyers. Overall, withholding taxes from the real estate sector reached Rs. 152 billion during the first seven months of the fiscal year, reflecting a 17 percent increase compared to last year.
