Salaried class pays triple the tax of exporters in first half of FY25

ISLAMABAD, JAN 25 (DNA): A significant increase in tax rates has led to the salaried class contributing over 300% more in taxes than exporters during the first half of the current fiscal year.

The FBR collected Rs243 billion in first half of current fiscal year against a collection of Rs157 billion in the same period of last financial year from salaried class.

Even with the combined contribution of both exporters and retailers, the salaried class paid more Income Tax during the first six months (July-Dec) period of the current fiscal year.

On the demand of the International Monetary Fund (IMF), the rates of slabs of salaried class were revised upward, especially for those who are drawing more than Rs0.5 to Rs1 million per month salary.

Keeping in view the existing pace, it would be the first fiscal year in the history of Pakistan when the government was going to force the salaried class to cough up a whopping tax amount of Rs500 billion into national kitty till June 30, 2025.

The FBR collected Rs367 billion from salaried class in the last fiscal year, ending on June 30, 2024. Now under the IMF’s $7 billion Extended Fund Facility (EFF), the tax rates for higher income slabs were revised upward to 40% that resulted in burdening more the salaried class. On other hand, the exporters’ Income Tax was revised upward from 1 to 2 per cent, which resulted in tax collection of Rs80 billion in the first half of the current fiscal year. In the same period of the previous fiscal year, the exporters had paid Rs40 billion when their tax rate stood at just 1%.

Official data of the Federal Board of Revenue (FBR) revealed that the salaried class paid Income Tax of Rs243 billion in the first half (July-Dec) period of the current fiscal year, while the exporters, who earned in foreign exchange (in US dollars), paid only Rs80 billion in the same period of the current fiscal year.

The much-hyped Tajir Dost Scheme (TDS) for retailers had miserably failed, but the FBR fetched increased revenues under section 236G and 236H from retailers in the current fiscal year.

Under Section 236G of Income Tax law, on the gross amount of sale to distributors, dealers or wholesalers other than sale of fertilizer. The FBR imposed two per cent tax.

Under Section 236H of Income Tax law, on the gross amount of sale to retailers, the tax rate of 2.5% would be charged from those who would prefer to remain outside the tax net. These two steps in shape of 236G and 236H forced the non-filers to come into tax net instead of paying tax amount on their gross amount of sale.

The FBR is facing a gigantic task of collecting Rs12,970 billion tax for the current fiscal year. The FBR so far faced a shortfall of Rs384 billion in the first six months and they are heading towards materialising another shortfall in the ongoing month (January 2025).

The FBR has collected Rs243 billion in first half of current fiscal year against a collection of Rs157 billion in same period of last financial year from salaried class.