AFTER being questioned on pre-budget claims, the finance minister clarified in a press conference that the proposed budget principally provides a `direction of travel` for relief. This caveat is useful to bear in mind because the actual scale of relief for overtaxed segments, such as the salaried class, remains limited.

The relief offered is slightly more tangible at lower tiers of salaried earners. For those making less than Rs225,000 per month, the proposed tax burdenisless than thatleviedin each ofthe last three years. Between 225,000 to 275,000 per month, the relief takes the burden back to 202223 rates. For those making above Rs275,000, even the reduced amount proposed this year is greater than what earners paid in all previous years barring the last one (2024-25). A let-off capped at Rs84,000 per year, or Rs7000 per month, is what many will re ceive.

There are two distinct reasons why reactions to the government`s proposals range from frustration to resigned indifference. The first is that the let-off, even for those at the lower end of the salary range, does nothing to compensate for the erosion of purchasing power on account of rampant inflation in the last three years. As documented by tax equity activist Amer Sharif, a person making Rs125,000 per month or Rs1.5 million annually, in 2022 paid Rs60,000 in income tax in that year. This year`s proposed budget reduces their annual tax burden by Rs24,000 to Rs36,000. Simultaneously, however, inflationary havoc means that the real value of the same salary today, in 2022 terms, is only around Rs55,000 per month.

One can argue that the job of tax relief is not to compensate for real wage erosion. That is a task better served by wage increments. But in a stagnant economy, which contracted just two years ago and has since grown at 2.7 per cent, the prospect of privately earned salaries keeping up with inflation is non-existent.

With the market not delivering, people are left with no option but to look to the government for relief, and the latter`s actions have been found wanting. The speed of downward mobility of giving up occasional leisure, of making difficult choices in terms of where to send children to school, of cutting back even on essentials -afflicting nearly every wage-earning household may have lessened a bit due to a fall in inflation, but the `direction of travel` is still the same.

If the first reason for frustration comes from feeling squeezed without tangible relief, the second comes from deep-seated injustice within the tax system. Salaried earners are treated as a captive source of additional revenue by the government. In the first eight months of the current fiscal year, salaried workers paid nearly Rs350 billion in income taxes, 56pc higher than what was paid in the same period last year. Of greater concern is that this amount is considerably higher than what`s paid by other categories of earners.

The system of at-source deduction by employers means a salaried worker doesn`t get a choice in taxation matters on their gross earning. On theother hand, a business owner (such as a retailer or wholesaler) can earn the same amount in gross but rely on a hundred `creative` ways to evade taxes. Cash-only transactions, multiple/benami accounts, fake receipts, dual ledgers are all deployed to maximum effect. Scheme after scheme to reduce this inequity has failed, with the latest the Tajir Dost Scheme yielding a comically low few million rupees against a target of Rs50bn. This year`s budget proposals appear to have shrugged off the issue altogether, making no tangible attempt to address this glaring inequity.

Adding to the overall frustration are two other budget proposals detrimental to salaried workers. The first of these is the removal of tax exemptions on withdrawals of up to 50pc of the balance from voluntary pensions funds. Such funds are most likely to be used by private sector salaried employees, who face uncertain retirement conditions without the luxury of state-guaranteed pensions. The one instrument that provided an alternative is now less viable as an investment product.

The other is the removal of the 25pc tax reduction offered to teachers and researchers in public and non-profit higher education institutes. Through a proposed clause, the Finance Bill provides retroactive coverage to this tax reduction for the past three years; a concession made possible only by the mobilisation efforts of faculty associations and university leaderships across the country.

But by sleight of hand, an additional subclause limits the relief till end June 2025, meaning the reduction does not apply from July onwards. This step further burdens a university sector already reeling under considerable financial pressure. Current expense allocations by the federal government for higher education are mostly stagnant around the Rs60bn mark. Many public and private sector universities struggle to pay faculty on time, let alone provide them with decent increments to keep up with inflation.

There is an indirect impact of these constraints on students via tuition fees, which go up to make forresource shortfalls.

The tax reduction offered a marginal benefit that helps make an essential occupation viable for its workers. No country can prosper without a functional higher education system. No higher education system can work without attracting and retaining good faculty. Granted, academic fulfilment often outweighs pecuniary benefits in attracting teachers and researchers. But crippling financial conditions can override even the most deeply held pro-social or intellectual motivations.

In the National Assembly`s Standing Committee on Finance, the secretary Revenue Division (ie, chairperson FBR) assured parliamentarians that the tax reduction will be restored without a sunset clause. It is imperative that the Finance Bill is revised to reflect this assurance. Otherwise the government should ask itself if it deems the occupational viability of teaching and research in Pakistan to be less worthy than the few more rupees it collects as tax revenue. • The writer teaches politics and sociology at Lums.

X: @umairjav