A storm of controversy has erupted in Pakistan following the introduction of sweeping tax reforms in the recently unveiled Finance Bill 2024. The most contentious aspect of the bill is a significant tax hike for individuals within the lower salary bracket, raising their tax liabilities by a staggering 100%.
According to a budget commentary by KPMG Taseer Hadi & Co., the new tax structure exempts those earning up to Rs.600,000 annually from income tax. However, for those just above this threshold, the picture turns grim. Individuals earning between Rs.600,000 and Rs.1.2 million will see their tax burden double, a harsh blow to their disposable income.
Here’s a breakdown of the proposed tax increases:
• Annual Gross Salary up to Rs.1.2 million: 100% increase (from Rs.15,000 to Rs.30,000)
• Annual Gross Salary up to Rs.2.4 million: 39.39% increase (from Rs.165,000 to Rs.230,000)
• Annual Gross Salary up to Rs.3.6 million: 26.44% increase (from Rs.435,000 to Rs.550,000)
While the tax burden increases progressively for higher salary brackets, the most significant percentage jump falls on those least able to shoulder it. This has sparked outrage amongst the salaried class, who argue they are already struggling with rising inflation and a stagnant cost of living.
Critics of the bill argue that the government should prioritize broadening the tax net and ensuring more equitable distribution of the tax burden. They point out that a significant portion of the population and a large swathe of the informal sector currently escape taxation altogether.
On the other hand, proponents of the reform package view it as a necessary measure to generate revenue and stabilize the national economy. Pakistan faces a significant fiscal deficit, and the government contends that these tax hikes are essential to bridge the gap.
The true impact of these tax reforms on Pakistan’s salaried class and the overall economy remains to be seen. In the coming weeks, public discourse will likely center on potential adjustments to the tax brackets and exploring alternative measures to meet the government’s revenue targets. One thing is certain: the 100% tax hike for lower income earners has ignited a fierce debate about fiscal responsibility and the burden borne by Pakistan’s working population.