Tax burden

Pakistan's salaried class continues to be treated as the state's most convenient cash cow - heavily taxed, tightly documented and yet persistently deprived of basic public services. Fresh figures from FBR show just how skewed the burden has become. During the first seven months of the current fiscal year, salaried individuals paid Rs315 billion in income tax, a jump of over 10% from an already high base last year. This contribution — more than double of what the real estate sector paid — has come despite stagnant wages and declining purchasing power.

The numbers are telling. Salaried individuals, across public and private sectors, now pay close to 38% of their gross income in taxes, a rate far higher than regional peers and grossly disproportionate when compared with undertaxed sectors such as retail and real estate. Yet this contribution remains largely unreciprocated. Public education, healthcare, transport, policing and urban services continue to deteriorate, forcing taxpayers to privately fund what should have been state-provided essentials. This imbalance is unjust and it is clear that the domestic tax-and-services equation is driving talent away. Even modest attempts at reform — such as taxing wealthy pensioners or broadening the tax base — have either yielded negligible returns or been quietly rolled back under pressure. Meanwhile, concessions such as allowing multiple pensions once again signal where political comfort truly lies.

If Pakistan is serious about retaining its human capital and restoring trust in the fiscal system, three steps are unavoidable. First, the tax burden must be rebalanced by meaningfully taxing undertaxed sectors and enforcing documentation without exemptions. Second, visible improvements in public services must follow so that taxpayers can see returns on their contributions. Finally, tax policy must shift from ad hoc, IMF-driven firefighting to a credible, long-term social contract.