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Saturday July 20, 2024

‘Higher taxes on salaried class adding to brain drain, informal economy

By Yousuf Katpar
June 26, 2024
Representational image shows a person using a calculator while tax return on paper. — APP/File
Representational image shows a person using a calculator while tax return on paper. — APP/File

Members of Salaried Class Alliance, a group said to be representing Pakistan's salaried individuals, held a press conference at the Karachi Press Club on Tuesday, deploring what they termed "social injustice" being meted out to the people who run the country's industrial and services sectors.

"There is only one class -- the salaried class in Pakistan -- that pays full income tax and the tax burden was already high. This middle class has been broken by increasing the tax rate in the recent budget," they said.

Ubaidullah Sharif, a member of the group, explained the alliance, which was formed last year, aims to make the salaried people's voice heard in the corridors where decisions are made. He said the government had burdened the already depressed salaried group instead of widening its tax base to meet its revenue target. "It has become difficult for the salaried individuals to make ends meet. On the one hand, inflation has skyrocketed and on the other hand, the take-home salary has decreased due to taxes," he lamented.

Komal Ali, another member, said the burden on the salaried group had increased in the past three years. "The contribution of the salaried class to Pakistan's tax revenue has gone up to Rs375 billion. How much more will you squeeze this class?" she asked.

She highlighted that the government was burdening the salaried individuals with more taxes because of its inability to bring those who did not pay taxes into the tax net. "Out of 12 million registered taxpayers, only 3.5 million are paying taxes. Why aren’t the remaining 7 million individuals being brought into the tax net? You are trying to milk more taxes from the salaried class," she went on. She said many small businesses were now paying their employees in cash, due to which the economy is reverting to informal and undocumented activities.

Adeel Ahmed Khan, member of the alliance, said the salaried people were an easy target for the government because they could not block roads and call shutterdown strikes like associations or groups. He wondered what the point of bringing a banker was to take over as finance minister if the taxes were to be increased like this.

“It is a case of social injustice in this country," he opined, adding that doctors and lawyers deal in cash, and people employed in informal sectors earn more than Rs100,000 a month, but they don't pay taxes. He said there are no representatives having a salary background in the assembly, so the salaried group doesn't have a voice in Parliament. "There's no one to speak for the salaried class in the assembly."

Adeel said brain drain of educated people from Pakistan to foreign countries has increased by 119 per cent in the last one year, and according to media reports, a major reason for this is the "brutal increase in taxes on the salaried class”.

He appealed to the government to shift the burden to other sectors, including agriculture where landlords "earn 20 per cent of GDP but pay less than one per cent in taxes”.

The alliances demanded that the minimum tax threshold for the salaried group should be fixed at a monthly income of Rs100,000 instead of Rs50,000 and the tax rate be brought down to at least the previous year's.

It called for either abolishing tax exemptions given to government officials, including their perks, vehicles and plots or giving equivalent exemptions to employees of all sectors. The alliance demanded that instead of putting the entire burden on the salaried class, the tax net should be widened and landlords and other classes should also be taxed.