Daily Times

In the last fiscal year, the salaried class emerged as a major contributor to the income tax revenue. This only shows that the salaried class under a severe tax burden. According to recent data, the salaried class contributed Rs 367.8 billion in FY2023-24, representing a 39.42 per cent increase from the previous year. This substantial rise in tax contribution places the salaried class as the third-largest revenue source, following only the banking sector and petroleum products. However, this increased burden underscores a troubling trend in the distribution of tax obligations.

The government’s decision to impose higher taxes on the salaried class shows it lack of having out of box solution to increase revenue. While sectors like banking and petroleum continue to see substantial contributions, they also benefit from relatively lower rates of taxation on sales and other indirect taxes. The salaried class bears the brunt of direct income taxes, which are increasingly burdening middle and lower-income workers. This disproportionate tax load exacerbates the financial strain on those who are least able to afford it, while other sectors manage to avoid comparable fiscal pressure.

For instance, the banking sector saw a remarkable 66 per cent increase in tax contribution to Rs946.08 billion, driven by soaring profits. Despite this growth, banks contribute minimally to other forms of tax revenue. Similarly, the petroleum sector, which collected Rs1.195 trillion in federal taxes, has imposed additional costs on consumers, contributing to rising inflation. High taxes on petroleum and electricity have significantly inflated living costs, yet these sectors continue to manage tax burdens in ways that often shield their consumers from the full extent of their fiscal responsibilities.

The salaried class, however, is not afforded such fiscal leeway. With their direct income taxes substantially increased, they are facing a harsher economic reality. The significant tax contributions from salaried individuals come at a time when the cost of living is soaring, driven by inflation rates that hit 23.41 per cent in FY24. This trend suggests a growing inequality in the distribution of tax responsibilities, where those with steady but relatively modest incomes are disproportionately impacted.

A fair tax system should ensure that all sectors contribute proportionately and that the financial strain on salaried individuals is mitigated, not exacerbated. Addressing these disparities is critical to ensuring a more just and balanced economic framework for all Pakistanis. *