Pakistan's salaried class paid Rs 264.3 billion in income tax, nearly 200% more than exporters and retailers.

 by webdesk

Pakistan's salaried class paid Rs 264.3 billion in income tax, nearly 200% more than exporters and retailers combined.

Data compiled by the Federal Bureau of Revenue (FBR) showed that salaried individuals paid Rs 264.3 billion in taxes during the fiscal year 2022-23. The amount paid by the salaried class in taxes up to the 35% rate was over Rs 75 billion or 40% higher than the previous year.

Wage earners were the fourth largest contributors to withholding taxes after suppliers, bank depositors and importers. FBR has not released these numbers officially yet.

In the last budget, the government increased taxes on the salaried class, which also became the reason for higher tax collection. Despite high taxation on the salaried class along with record high inflation, the government has once again increased taxes on salaried people earning more than Rs 200,000 per month in this budget. Meanwhile, about 5,000 retailers have eased their registration conditions.

During the last fiscal year, the FBR collected over Rs 2 trillion in withholding taxes, which was equal to 61% of the total income tax generated by the FBR in the previous fiscal year. However, details indicated that collection of withholding tax, especially at double rates from non-filers, has become an easy source of revenue collection for the FBR.

Chasing existing taxpayers for more while allowing the informal sector to grow is akin to killing the goose that lays the golden egg, according to the Salaried Class Alliance. The maximum amount of income tax has been collected from suppliers, savings account holders, importers and salaried persons, electricity bills of non-filers, telephone and mobile phone users and dividend income, data compiled by the FBR shows. Other major revenue pegs were taxes on the purchase and sale of real estate, exports, foreign income tax, brokerage commissions, and car registration.

However, according to provisional figures, exporters and retailers combined pay Rs 175 billion less in taxes than the salary class. The total income tax paid by exporters and retailers was Rs 89.5 billion in the last fiscal year, which was Rs 175 billion or 196% less than the income tax paid by individuals.

Exporters, who earned $27.7 billion in the last fiscal year, paid a paltry 74 billion rupees in taxes. Their tax share was 17.4% higher than the previous year, but less than the increase in their rupee income. Exporters pay only 1% of their gross receipts in income tax. However, representatives of the exporters claimed that their effective rate is almost equal to the maximum grade rate of 35%. The claim has not been independently verified.

Debt profit collection jumped 106% to Rs 320 billion in the last fiscal year. The increase suggests the impact of higher interest rates and people's tendency to save money. Banks charge 10% to 50% income tax rate on behalf of FBR on these savings accounts

Similarly, at the rate of 0.5% advance tax on sales to retailers, the FBR collected just Rs 15.6 billion from retailers in the last fiscal year. It was probably the lowest contribution of any income group. The share of retail and wholesale trade in the total size of the economy was around 19%, but their share of total income tax was only 0.4%.

Importers paid Rs 290 billion in income tax on various types of imports – they are the third largest contributor of withholding taxes.

The IMF also unfairly puts more burden on the salary class, which, unlike exporters and retailers, has no voice in the corridors of power.

Tax collection from suppliers and service providers jumped 3% to Rs 391 billion in the last fiscal year. Even though it is the biggest boss of income tax collection, FBR has no role in it.