Tax Collection Improves in First Half of FY; Salaried Class Contributes 300% More Than Exporters and Retailers

Islamabad:In the first half of the current fiscal year, significant improvements in tax collection have been observed, with salaried individuals paying 300% more income tax compared to exporters and retailers. According to a report by *The News*, salaried individuals, particularly those earning between 500,000 to 1 million rupees or more per month, have seen an increase in their tax rates as per the IMF’s demand, with higher tax slabs introduced for higher income earners.

This year is set to be a milestone in Pakistan’s history, with the government expected to collect a substantial amount of 500 billion rupees from salaried individuals by June 30, 2025. In the previous fiscal year, the Federal Board of Revenue (FBR) collected 367 billion rupees from the salaried class. However, under the IMF’s Extended Fund Facility (EFF), the tax rate for higher-income earners has been increased to 40%, resulting in additional tax burden on the salaried class.

Meanwhile, the tax rate for exporters was raised from 1% to 2%, resulting in a collection of 80 billion rupees in the first half of the current fiscal year. In the same period last year, exporters contributed only 40 billion rupees when their tax rate was 1%.

FBR data shows that from July to December of the current fiscal year, salaried individuals paid 243 billion rupees in income tax, while exporters, earning in foreign currency (USD), contributed just 80 billion rupees. This highlights that the salaried class’s contribution was 300% higher than that of the exporters.

Although the much-discussed traders-friendly scheme (TDS) for retailers has been largely unsuccessful, FBR managed to increase revenue through Sections 236G and 236H of the Income Tax Ordinance. These sections impose a 2% tax on distributors, dealers, or wholesalers based on the total sales volume, excluding fertilizer sales, and a 2.5% tax on retailers who prefer to remain outside the tax net.

Despite these efforts, FBR is facing a tough challenge in meeting its target of 12.97 trillion rupees for the current fiscal year. The board faced a deficit of 384 billion rupees in the first six months and is currently on track to experience another shortfall in January 2025.