Pakistan’s economy continues to face serious challenges — from fiscal instability and shrinking industrial productivity to a narrow tax base that restricts public service delivery. Rising inflation, high interest rates, soaring energy prices, and an ever-increasing cost of living have left citizens struggling to stay afloat.
What was once a tax system designed to promote fairness and progress has now become a mechanism that deepens inequality. For millions of hardworking Pakistanis, taxation feels less like a civic duty and more like an act of confiscation — demanding more while giving little in return.
The Unfair Burden on Salaried Employees
Pakistan’s tax structure has long been criticized for its imbalance between direct and indirect taxes. A large share of revenue still comes from indirect taxes — sales tax and withholding taxes — which affect everyone regardless of income. Yet, within the small pool of compliant taxpayers, the salaried class bears a disproportionate share of the burden.
According to Federal Board of Revenue (FBR) data for FY 2024-25, the salaried class contributed Rs 605.953 billion in income tax — a 54.7% increase — making them one of the most compliant segments of the economy. These taxes are deducted at source, often on gross income, including heavily valued in-kind benefits, leaving employees with shrinking disposable incomes. Despite this, they still pay 18% sales tax on their post-tax earnings.
In contrast, major economic sectors — particularly retail, wholesale, and real estate — either enjoy low tax rates, remain outside the net, or pass their tax burden on to consumers.
Data That Speaks Volumes
FBR’s Revenue Division Year Book 2025 shows that income tax collected from salaries (Rs 606 billion) was almost equal to the combined total collected from exporters (Rs 122 billion), retailers, wholesalers, property income, and immovable property transactions. This underscores how excessively the state relies on salaried individuals.
Out of 75 million workers in Pakistan, only 5.6 million are registered taxpayers — and the majority of them belong to the salaried class. This points to both weak enforcement and a structural bias against formal employment.
Confiscatory Taxation and the Cost of Living
Taxation on salaried workers has now reached confiscatory levels. With income tax and mandatory deductions such as provident fund and pension contributions, the marginal tax rate for middle-income earners exceeds 35%.
Such rates might be justified if citizens received adequate public services — quality education, healthcare, infrastructure, and social safety nets. Unfortunately, Pakistan offers little in return. As a result, salaried individuals must bear the additional burden of private schooling, costly healthcare, and personal security — all from already reduced take-home pay.
A Narrow Tax Net and Widening Inequality
In FY 2024-25, FBR collected Rs 11.7 trillion in total taxes, of which income tax contributed Rs 5.76 trillion. Shockingly, only Rs 267 billion (4.6%) came from direct collection through enforcement — a clear sign of the authorities’ inability to hold non-compliant sectors accountable.
Instead of expanding the tax net or eliminating the Rs 5 trillion in exemptions enjoyed by powerful groups, the government continues to squeeze the compliant salaried class. While this approach may temporarily stabilize revenue, it erodes public trust and weakens the vision of socioeconomic justice.
A Call for Fair Reform
The current tax brackets further reflect this inequity. For FY 2024-25, individuals earning between Rs 600,000 and Rs 1.2 million annually face tax rates that may seem modest, but inflation erodes any real relief. Above Rs 2 million, tax jumps sharply — punishing hard work and professional growth. Without inflation-adjusted thresholds or meaningful tax relief, even small salary increments push workers into higher brackets, effectively taxing their progress.