Salaried individuals have paid 21% more in income tax during the first two months of the current fiscal year, contributing Rs85 billion, indicating that the nominal rate reductions in the budget were insufficient to ease their financial burden.
Government sources stated that compared to Rs70 billion paid in income taxes during July-August of the previous fiscal year, contributions surged by approximately Rs15 billion this year, despite the slight reduction in tax rates announced in the budget.
Finance Minister Muhammad Aurangzeb acknowledged that the relief was minimal due to the limited fiscal space available.
The 21% increase came on top of an already high base from the previous year, when the salaried class’s tax contributions had jumped by over 50% following abnormal rate increases.
Record-high tax payments by salaried individuals, who pay income tax on gross salaries without much room to adjust expenses, have significantly reduced the take-home pay of a large segment of the population.
In the last fiscal year, salaried individuals paid Rs555 billion in income taxes, up 51% or Rs188 billion compared to the preceding year.
The budget had marginally reduced the tax burden for those earning up to Rs3.2 million annually, promising a Rs56 billion benefit, but in reality, this relief was minimal compared to the actual contributions.
Breakdown details showed that non-corporate sector employees paid Rs41.5 billion in income tax last fiscal year, up Rs8.5 billion or 26%, while corporate sector employees paid Rs20 billion, an increase of Rs5.2 billion or 26%.
Employees of provincial governments contributed nearly Rs10.5 billion in taxes, up Rs626 million or 6%.
The Federal Board of Revenue (FBR) spokesman, Dr Najeeb Memon, did not comment on the rising tax burden on salaried individuals despite the nominal rate cuts.
Federal government employees paid Rs7.6 billion, higher by Rs552 million or 8%, according to provisional figures compiled by the FBR for July-August.
The government’s new tax on wealthy pensioners has failed to yield higher revenues, showed the results. In the budget, the government imposed income tax was imposed on pensions valued at more than Rs10 million annually.
However, the FBR collected only Rs180 million in two months, indicating that the annual collections may be little over Rs1 billion, said the sources.
Parliamentary committees are also currently probing the perks and salaries of the Securities and Exchange Commission of Pakistan (SECP) officials.
The office of the Auditor General of Pakistan (AGP) had raised initial objections over an abnormal increase in the salaries of SECP commissioners and the chairman, which the SECP board approved on the management’s recommendation.
The Senate Standing Committee on Finance this week discussed the issue in detail and objected to giving salaries to a commissioner against 17 heads.
Senator Anusha Rahman of the Pakistan Muslim League-Nawaz criticised giving 10% of the total salary as house rent allowance and another 10% as utility allowance to a commissioner. She also objected to club memberships.
This week, the AGP presented details of the audit objections in the standing committee, which showed that a commissioner was getting up to Rs1.9 million annually on account of security guard payments.
Contrary to this, there were low-paid daily wagers working in the government who were not even receiving the minimum monthly wage, according to proceedings of the National Assembly Standing Committee on Finance.
Rahman has introduced a private member bill in the Senate to withdraw the SECP board powers to determine management salaries.
She is planning to move a similar bill to strip the State Bank of Pakistan board of such powers.
While the salaried class’s tax contributions are constantly on the rise, the government has failed to collect due taxes from traders.
Several enforcement measures have already been reversed including the biggest one which was to ban economic transactions by ineligible persons.
This initiative was rendered ineffective after the government exempted most of the transactions from the purview of the new law, and accepted cash deposits in banks as equal to digital transactions.
Over the period, the government also increased the tax burden on the real estate sector by raising rates for non-filers and introducing a new category of late filers in the budget.
This has impacted the growth of the sector, in addition to other initiatives aimed at discouraging investment in undeveloped lands.
In this budget, the government made adjustments in the withholding tax rates on sales and the purchase of plots.
As a result, the government collected Rs28 billion on sales of plots, higher by 92% or Rs13.4 billion.
However, the collection on the purchase of properties amounted to less than Rs13 billion, down by Rs2 billion or 12%.
