Lopsided taxation

Pakistan's tax system perpetuates an inequitable burden on salaried individuals, posing significant challenges to their financial well-being. Recent data revealing the staggering income tax contributions from the salaried class during the first quarter of the current fiscal year paints a troubling picture of unfair taxation policies. Salaried individuals have shouldered a disproportionate tax burden, contributing a substantial Rs111 billion in income tax. This amount is over 15 times as much as what has been paid by traders, highlighting a stark contrast in tax treatment.

The imposition of higher tax rates on salaried individuals, coupled with a lack of relief measures, has placed an undue strain on their already declining net incomes. Private sector employees, in particular, who often do not receive guaranteed annual increases in their salaries and were already dealing with record inflation, have been significantly impacted.

The government's decision to increase the effective income tax rate for salaried persons, associations of persons and non-salaried individuals to nearly 39%, 44% and 50% respectively is deeply concerning. And while increasing taxes on highest earners is generally in line with progressive tax practices, it does become unfair when traders making significantly more money pay not only a lower effective tax rate, but oftentimes, no taxes at all, and are still able to benefit from government amnesties and other forgiveness programmes every few years. Meanwhile, high-salary individuals must pay the new 'supertax' to help fill the gap created by billionaire tax evaders, some of whom actually 'help' craft tax policies.

The government's reliance on salaried individuals for a significant portion of tax revenue while sparing others is not just unjust and unsustainable, it actively reduces economic activity, stunting growth. Any new tax burden deemed necessary should solely be placed on traders and real estate, which is another sector that inexplicably gets favourable treatment despite creating almost no economic growth.