ISLAMABAD – In a startling revelation that underscores the widening tax burden on Pakistan’s working class, the Federal Board of Revenue (FBR) has reported that salaried individuals paid a record Rs555 billion in income tax during the financial year 2024–25. This figure marks a staggering Rs188 billion increase compared to the previous year, highlighting a disproportionate taxation model that continues to sideline influential sectors like real estate and retail.
A Massive Tax Burden Shifted to the Salaried Class
According to provisional data compiled by the FBR, the salaried segment—comprising employees from the public and private sectors—contributed an all-time high of Rs555 billion in direct income tax. This represents a 51% increase over the Rs367 billion collected from the same group during the 2023–24 fiscal year.
What makes this figure more troubling is the comparison with the taxes paid by other sectors. The salaried class paid 100% more tax than the combined total contributed by retailers and the real estate sector, industries that historically enjoy loopholes and lenient tax enforcement.
Lack of Tax Adjustments Deepens Financial Strain
Unlike business owners and investors who often have the ability to claim deductions or hide taxable income through creative accounting or loopholes, salaried individuals are taxed at source. This means their taxes are automatically deducted from their monthly salaries—leaving no room for expense adjustments or deductions.
For millions of professionals—engineers, teachers, IT workers, bankers, healthcare personnel, civil servants—this rigid tax structure has resulted in reduced take-home salaries and rising frustration.
“It’s like we are being penalized for earning honestly,” said Ali Khan, a mid-level corporate manager based in Karachi. “We pay tax on every rupee we earn, while entire sectors evade their fair share.”
Disparity in the Tax System: Retail and Real Estate Sectors Underpaying
The glaring disparity in the taxation system is evident from the comparison with the retail and real estate sectors, which together contributed less than half of what salaried individuals paid.
Key Facts:
- Salaried class paid Rs555 billion
- Retailers and real estate sectors combined paid significantly less
- Despite earning substantial profits, these sectors benefit from weak enforcement and political protection
The real estate sector, for example, remains largely undocumented, allowing investors and developers to evade taxes through undervalued property declarations and cash-based transactions. Similarly, retailers, especially those operating in informal markets, rarely report full income, escaping the tax net with minimal penalties.
Government’s Fiscal Targets vs. Ground Realities
In its federal budget projections, Prime Minister Shehbaz Sharif’s government claimed that the increase in salaried tax contributions would yield Rs75 billion in additional revenue. However, the actual increase has been more than double that amount—Rs188 billion—raising questions about transparency and planning.
This gap between projected and actual collections has sparked criticism from economic analysts and labor unions who argue that the government is using the salaried class as a cushion to meet IMF-mandated revenue targets, while failing to broaden the tax base.
“The salaried class is an easy target because they are already within the formal economy,” said economist Dr. Qaisar Bengali. “The government lacks the will or courage to go after untaxed segments that enjoy political clout.”
Minor Tax Relief Not Enough
In a recent move, the government marginally reduced the tax burden for individuals earning Rs3.2 million annually, claiming that the step would provide relief worth Rs56 billion. However, critics argue that the relief is too small to offset the larger fiscal burden imposed earlier in the year.
For instance, while the government did lower the tax rates for this income bracket, the overall tax framework remains regressive, especially when inflation, rising utility bills, and stagnant salaries are taken into account.
“It’s like giving with one hand and taking with the other,” remarked tax consultant Farah Naz. “Relief for some brackets is meaningless when the entire structure is skewed against honest wage earners.”
Who Are the Real Beneficiaries?
A deeper dive into Pakistan’s tax policy reveals that those with the loudest voices and strongest lobbies—such as property tycoons, traders, and big agriculturalists—continue to benefit from tax amnesties and exemptions.
Examples:
- Real estate sector enjoys valuation loopholes through FBR and DC rates.
- Agriculture income, especially from large landholders, remains underreported or entirely tax-free.
- Retailers often operate without proper Point-of-Sale systems, under-declaring sales.
Meanwhile, the salaried class—doctors, teachers, engineers, civil servants, and IT professionals—are penalized for being part of the documented economy.
Impact on Society and the Middle Class
The implications of this tax disparity are far-reaching. With declining disposable incomes, many households are struggling to meet basic living expenses, including education, healthcare, rent, and utility bills.
The middle class, often referred to as the backbone of the economy, is shrinking, with professionals either seeking overseas employment or turning to side gigs to sustain their lifestyle.
“There’s no incentive left to stay in the country,” said Ayesha Malik, a 35-year-old doctor planning to migrate to the UAE. “We work day and night only to be overtaxed and underappreciated.”
What Experts and Economists Are Saying
Economic Analysts:
Economists argue that the government’s overreliance on the salaried class could backfire in the long run.
“When a government consistently taxes its most honest segment while ignoring defaulters, it discourages formal employment and incentivizes informality,” said Dr. Hafeez Pasha.
Tax Reform Advocates:
Calls for broadening the tax base are growing louder. Experts suggest the following measures:
- Enforcing Point-of-Sale (POS) systems on all retailers
- Digitizing and taxing real estate transactions
- Implementing agriculture income tax on large-scale farmers
- Ending tax amnesty schemes that reward evasion
Conclusion: Time for a Fairer Tax System
The revelation that salaried individuals contributed a historic Rs555 billion in income tax during FY 2024–25 should serve as a wake-up call for policymakers. While it demonstrates the integrity and contribution of Pakistan’s working professionals, it also highlights a deep-rooted imbalance in the country’s taxation structure.
If the government is serious about fiscal justice, economic growth, and retaining talent, it must ensure that all segments of society contribute equitably. The burden of nation-building must not rest solely on the shoulders of the most transparent and accountable group—Pakistan’s salaried class.
