ISLAMABAD:
Salaried individuals have paid a staggering Rs555 billion in income tax in the last fiscal year, which were Rs188 billion more than the preceding year and also 100% more than the combined taxes paid by retailers and real estate sector.
The record-high contributions by people, who pay income tax on the gross salaries without having the luxury to adjust their expenses, substantially reduced the home-take salaries of a larger segment of society.
According to provisional figures compiled by the Federal Board of Revenue, the salaried persons paid Rs555 billion in income tax during the fiscal year 2024-25. The unwilling contributions were 51% or Rs188 billion more than the taxes collected from the salaried persons in the preceding fiscal year.
In the fiscal year 2023-24, the government had collected Rs367 billion from the salaried persons. The government of Prime Minister Shehbaz Sharif had phenomenally increased the tax burden of the salaried class and claimed it would generate only Rs75 billion in additional income taxes.
The highest ever contributions by the salaried persons in a single year showed how the voiceless people have been discriminated against the powerful sectors of the country.
Last month, the government marginally reduced the tax burden of the people earning up to Rs3.2 million annually, which it said would give them a benefit of Rs56 billion. This nominal benefit of Rs56 billion compared to the current contributions is like a drop in the bucket, which would not address the fiscal woes of the salaried individuals.
Despite putting enormous burden on the salaried class, the FBR missed its annual collection target by a margin of around Rs1.2 trillion.
The details showed that non-corporate sector employees paid Rs236.5 billion income tax in the last fiscal year, which is higher by Rs67 billion or 40%. Corporate sector employees paid Rs165 billion in income tax, also higher by Rs54.6 billion or 49%.
Employees of the provincial governments paid Rs99.5 billion in taxes, which was up by Rs49 billion or 98%. The federal government employees paid Rs54.2 billion, higher by Rs17 billion or 45%.
Total income tax payments during the last fiscal year were Rs5.8 trillion and the salaried class paid Rs1 out of every Rs10 collected from the entire country under the head of income tax.
In contrast to Rs555 billion paid by the salaried persons, the retailers, mostly unregistered, have contributed only Rs38 billion on account of withholding income tax on their purchases. The amount of tax that traders paid under section 236-H was 1,360% less than taxes paid by salaried persons.
Besides, wholesalers and distributors also paid Rs25 billion withholding tax in the last fiscal year and almost half of them were unregistered with the FBR, said the sources.
PM Sharif could not live up to his promise of collecting due taxes from the retailers. The Tajir Dost scheme failed to yield desired results and the government has not announced any new measure in the budget to bring the retailers in the tax net.
Its biggest enforcement measure to ban the economic transactions by ineligible persons has become effectively useless after the government exempted more than 90% transactions from the purview of the new law. The government has allowed the ineligible persons, those having not enough declared resources, to buy up to Rs7 million worth of a car, Rs50 million worth plot and Rs100 million commercial property.
In the budget, the government had imposed 2.5% withholding tax on traders, in the hope that this would force them to come into the tax system. Though the increase in the rate did help collect Rs21 billion more from the traders, the intended objective could not be achieved. The traders passed on the cost of the additional tax to the end consumers.
In the last budget, the government had also substantially increased the tax burden of the real estate sector by increasing the rates for the non-filers and also introducing a new category of late filers in the budget.
As a result, during the last fiscal year, the government collected Rs237 billion on sales and purchase of properties. This helped increase collection by 19% compared to the previous fiscal year but it was still below the mark.
The combined taxes paid by both retailers and the real estate sector were 100% less than the total contributions by the salaried persons.
On the sale of properties, the government collected Rs119 billion on account of withholding taxes, which were one-fourth more than the preceding fiscal year. On the purchases of the plots, the government collected another Rs118 billion, also higher by 14%.
In the new budget, the government has abolished the federal excise duty on the real estate sector. The net taxes on the sales and purchases remained unchanged, although the government shifted higher burden towards the sellers by increasing their withholding tax rates.
