Islamabad, August 25, 2024 – The salary class in Pakistan has made a substantial contribution to the country’s tax revenues, paying Rs 322 billion in income tax during the fiscal year 2023-24. This remarkable figure was disclosed by official sources in the Federal Board of Revenue (FBR), highlighting the significant role of salaried individuals in the national tax collection framework.
According to the FBR, the income tax collected from the salary class grew by 22% compared to the previous fiscal year. In the fiscal year 2022-23, the salaried class had paid Rs 264 billion, indicating a substantial increase of Rs 58 billion in just one year. This rise underscores the growing importance of income tax from salaried individuals as a crucial source of revenue for the government.
Breakdown of Contributions by Different Segments
The FBR collects income tax from the salaried class by applying Section 149 of the Income Tax Ordinance, 2001. The breakdown of the tax paid by different segments of the salaried class during the fiscal year 2023-24 reveals interesting trends:
1. General Salary Class (Others): Individuals categorized under ‘others’ contributed the most, with a total of Rs 159.32 billion paid in income tax. This figure represents a 21.6% increase from the Rs 131 billion collected in the previous fiscal year. The ‘others’ category typically includes private-sector employees and non-corporate entities, reflecting a diverse group of taxpayers who have shown strong compliance and increased earnings.
2. Corporate Salary Class: The corporate salaried class, which includes employees of corporate entities, contributed Rs 106.52 billion in income tax for the fiscal year 2023-24. This segment saw the highest growth rate among all categories, with a 37% increase from the Rs 77.80 billion collected in the fiscal year 2022-23. This significant rise can be attributed to higher salaries in the corporate sector, possibly due to economic recovery and inflation adjustments.
3. Federal Government Employees: The income tax collected from federal government employees amounted to Rs 22.56 billion, showing a notable increase of 54% compared to the previous fiscal year’s collection of Rs 14.66 billion. This sharp rise could reflect salary increments, promotions, and increased compliance within the federal government sector.
4. Provincial Government Employees: In contrast to other segments, the tax contribution from provincial government employees declined by 18%, falling from Rs 32.22 billion in the fiscal year 2022-23 to Rs 26.34 billion in 2023-24. The decrease in tax collection from this segment may be due to factors such as budgetary constraints or changes in provincial salary structures.
Implications and Future Outlook
The substantial tax contributions from the salaried class are crucial for Pakistan’s fiscal stability and development. The increase in income tax collection aligns with the government’s broader strategy to enhance revenue collection and reduce dependency on indirect taxes. By focusing on direct taxes such as income tax, the government aims to create a more equitable tax system that ensures higher-income earners pay their fair share.
Moreover, the significant growth in tax contributions from the corporate salary class suggests a robust economic recovery and a potentially expanding job market. However, the decline in contributions from provincial government employees indicates a need for targeted measures to enhance compliance and revenue generation in that sector.
The FBR’s emphasis on enforcing tax laws and improving collection mechanisms has evidently yielded positive results. Moving forward, continued efforts to broaden the tax base, enhance compliance, and streamline collection processes will be essential in sustaining and increasing the revenue generated from the salaried class.
As the fiscal year 2024-25 progresses, the FBR will likely continue to refine its strategies to maximize tax compliance and revenue collection, ensuring a more stable and prosperous economic future for Pakistan.
