Pakistan's salaried class shoulders growing tax burden under IMF programme
The salaried class paid Rs144 billion in income tax in the first three months of the current fiscal year, Rs90 billion more than the retail and real estate sectors paid between them, according to provisional Federal Board of Revenue collection data. The figures, which cover July to September, put the salaried class's contribution Rs13.4 billion, or 10.2 per cent, above the same period last year, while the two sectors widely described as undertaxed continued to lag.
Income tax collection from real estate fell 38 per cent to Rs35.2 billion in the quarter, Rs22 billion less than a year earlier, after the government halved the advance tax on the sale and purchase of immovable property — a measure the IMF also endorsed. Three slabs on property sales were merged into a single rate of 2.75 per cent, down from 5.5 per cent, and the rate on purchases was cut to 1.25 per cent from 2.5 per cent. Collection on sales fell to Rs23 billion from Rs39.5 billion, a drop of 42 per cent, while collection on purchases was down 31 per cent at Rs12.2 billion, from Rs17.7 billion. The sector paid Rs200 billion in income tax in fiscal year 2024 and Rs236 billion the following year, and the reported data show that contribution now halved.
Wholesalers and retailers fared little differently. Combined withholding tax paid by the two groups came to Rs18.4 billion in the quarter, only 1.3 per cent, or Rs244 million, more than a year earlier. Wholesalers paid Rs6.2 billion, down 10 per cent, while retailers paid Rs11.3 billion, an increase of 8.3 per cent. The fixed tax scheme the FBR introduced for retailers has not drawn traders into the net, despite their commitments to become return filers, and the figures leave the combined retail and real estate contribution at Rs54 billion for the quarter.
In the budget, the government said it had given the salaried class Rs52 billion of relief through a reduction in rates of up to 3 percentage points, the abolition of the 9 per cent surcharge calculated on the highest rate of 35 per cent, and an increase in the income threshold at which that top rate applies, to Rs7 million a year from Rs4.1 million. Before the IMF programme began, the salaried class contributed Rs391 billion a year, a figure that rose to Rs629 billion as of June 2026 within two fiscal years of the programme. Salaried and other middle- and lower-middle-income households are also affected by the full recovery of international oil prices, a petroleum levy of Rs80 per litre and a climate support levy of Rs5 per litre, with daily price movements feeding into fruit and vegetable prices.
The IMF executive board approved the three-year, $7 billion loan package in September 2024, and the Fund's staff has completed its ongoing visit to Pakistan for the fourth review of the programme. Prime Minister Shehbaz Sharif had promised to substantially reduce the tax burden of the salaried class once the tax base was broadened; the collection data show the burden on the undertaxed sectors being cut instead.
