FOLLOWING the imposition of higher tax rates on Pakistan`s captive taxpayers (the salaried class), citizens now contribute Rs1.3 billion daily to the national exchequer. Totalling Rs41bn each month, annual tax collection is expected to exceed the Rs500bn mark by the end of FY25 against Rs368bn collected in FY24.

While this boosts the Federal Board of Revenue`s performance and eases International Monetary Fund (IMF) pressure on the government, it raises a critical question: has this transfer of funds from households to the state truly benefitted the economy? The answer is far from clear.

Higher monthly tax deductions leave salaried families with less to meet their needs, with no visible improvement in the availability of public goods and services, whether social and physical utilities or even basic government responsibility of ensuring a safe, healthy environment and hope for a better future. If this has alienated the public and further eroded trust in the government and its claims of serving the nation, it is perfectly understandable.

It explains the desperation as to why so many young people are eager to leave the country in search of a better future, often risking whatever limited capital or goodwill they have. Some are lost along the way, while those who do make it to foreign shores face years of struggle in often hostile environments before coming close to achieving what they had hoped for.

`Yes, the decision to immigrate, however personal it may be, is influenced by harsh realities. While illegal human trafficking networks exploiting desperate individuals must be dismantled and prosecuted, the government also bears responsibility for deteriorating economic conditions and the lack of opportunities that drive people to such extremes. Its image of being apathetic, unfair, and self-serving only deepens the crisis, commented an economist.

According to reports based on the Federal Board of Revenue (FBR) documents, income tax payments from the salaried class surged by Rs103 billion in the first seven months (July 2024 to January 2025), reaching Rs368bn, exceeding government projections.

Another report revealed that the corporate sector employees paid 50 per cent more than last year, provincial government employees contributed 96pc more, and federal government employees paid 63pc more in income tax compared to the previous year. Overall, tax revenue from this group grew by about 40pc year-on-year, significantly outpacing contributions from much wealthier segments likeexporters, retailers, and realtors.

Neighbouring India recently lowered its income tax rates to stimulate economic growth by boosting consumer spending and easing the financial burden on its middle class. Their revised tax structure simplified the system by reducing the number of tax slabs and raising the income threshold for exemptions.

Some members of the government`s economic team and leaders of coalition parties have hinted at readjusting income tax rates in the next budget to ease the burden on salaried citizens. Ali Pervez Malik, Minister of State for Finance, Revenue, and Power, reportedly suggested this during an event in Islamabad. In response to a query, Senator Saleem Mandwiwala of the Pakistan Peoples` Party remarked, `Yes, it is unfair to disproportionately burden the salaried class, and I will personally advocate for them in the next budget.

A senior FBR official acknowledged that any increase in taxation should be tied to improvement in governance. `FBR bashing, low tax-toGDP ratio, and skewed taxation have long been part of Pakistan`s taxation debate, but the issue of public service delivery is notably absent from the national narrative.

`The salaried class deserves fairer tax rates in the next budget. In Pakistan, tax rates have become excessively high, putting us on the wrong side of the Laffer Curve. Higher rates aren`t generating more revenue; instead, they are driving tax evasion.

`Following India`s tax rate cuts, our parliament should provide relief to salaried individuals instead of hiding behind the IMF`s requirements. The IMF can be persuaded to accept lower rates through evidence-based dialogue, he commented.

Unfortunately, Shabbar Zaidi, former chairman of the FBR, saw no possibility of a downward revision in tax rates in the foreseeable future.

Meanwhile, Rehmatullah Wazir, a former member of the FBR, expressed deep concern over the current state of taxation. `The tax burden on the salaried class has surged by about 53pc under the IMF`s directives. Given the high cost of living and lack of social benefits, this is blatantly unfair. It could also accelerate the ongoing brain drain of qualified professionals from Pakistan.

`To ensure fairness, the salaried class should be given relief in the next budget. This could include reducing the maximum slab from 35pc to 30pc, raising the basic yearly exemption from Rs600,000 to Rs800,000, and cutting the rates of the lower three slabs by 5pc each across the board,` he suggested.