Overseas Investors Chamber of Commerce and Industry has proposed increasing the taxable salary income threshold to Rs1.2 million annually in the federal budget 2026-27, compared to the existing limit of Rs600,000.
The chamber urged the government to provide meaningful tax relief to Pakistan’s salaried class, describing them as among the country’s most transparent and compliant taxpayers.
OICCI calls for reduction in tax burden
According to the OICCI, salaried individuals continue to bear a disproportionate tax burden despite facing high inflation, increasing utility costs and declining purchasing power.
The chamber noted that salaried taxpayers remain fully documented because income tax is deducted directly at source.
Citing data from the Federal Board of Revenue, the OICCI said salaried individuals paid Rs365 billion in income tax during July-February FY2025-26.
The contribution exceeded the combined taxes paid by retailers, wholesalers, exporters and property-related sectors during the same period.
Effective tax burden estimated at 38.5%
The OICCI estimated that the effective tax incidence on salaried individuals has reached as high as 38.5%, significantly affecting disposable incomes and household consumption.
The chamber warned that excessive taxation on formal employment could discourage documentation and weaken economic activity.
Key proposals for budget 2026-27
To provide relief to salaried taxpayers, the OICCI recommended several measures for the upcoming federal budget:
• Increase taxable salary threshold to Rs1.2 million annually
• Maintain return filing requirement from Rs600,000 income level
• Reduce the top salary tax slab to 25%
• Abolish the 10% surcharge on salaried income
The chamber argued that the surcharge unfairly penalizes compliant taxpayers already contributing heavily to national revenues.
OICCI highlights imbalance in taxation
The business chamber stated that Pakistan’s salary tax rates are comparable to some advanced economies, despite significantly lower standards of public services and social protection.
According to the OICCI, this imbalance highlights the need for a fairer and more equitable taxation system.
The organization emphasized that sustainable revenue growth should come from expanding the tax base instead of placing additional pressure on already documented sectors.
Need to broaden tax net
The OICCI urged authorities to bring under-taxed sectors into the formal economy to ensure balanced taxation and long-term fiscal sustainability.
The chamber maintained that a predictable and transparent tax structure would improve compliance, strengthen economic stability and support sustainable growth in Pakistan.
The federal government is currently finalizing proposals for the budget 2026-27, which is expected to be presented next month.