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Introduction:
A recent report highlights the stark disparity in income tax contributions between Pakistan’s salaried class, exporters, and retailers. Despite inflation and increasing taxes, the salaried individuals bear a heavier tax burden, leading to concerns about economic inequality and its impact on the country’s overall economy.
Salaried Class Bears the Brunt of Taxation:
The data compiled by the Federal Board of Revenue (FBR) for the fiscal year 2022-23 revealed that the salaried class paid a staggering Rs264.3 billion in income tax, making them the fourth-largest contributors to withholding taxes. However, despite their significant contributions, the salaried individuals faced an additional tax burden as the government increased their taxes in the last budget.
Disparity Among Contributors:
The report showed that the total income tax paid by exporters and retailers was Rs89.5 billion, which is 196% less than the income tax paid by salaried persons. Exporters, despite earning $27.7 billion in the last fiscal year, paid a mere sum of Rs74 billion in taxes, raising concerns about their relatively low tax contribution compared to their earnings. Similarly, retailers and wholesalers, who account for around 19% of the economy, contributed a mere 0.4% to total income tax collections.
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Impact on the Economy:
The disparity in tax contributions raises concerns about the impact on the economy and the allocation of resources. While the salaried class shoulders a significant tax burden, exporters and retailers, who hold substantial shares in the economy, contribute considerably less to the income tax pool. This situation may lead to a skewed distribution of resources and hinder economic growth and development.
IMF’s Role and Salaried Class Representation:
The report also highlights concerns about the International Monetary Fund (IMF) putting more burden on the salaried class, while exporters and retailers enjoy certain exemptions. Furthermore, the salaried class faces challenges in voicing their concerns and opinions in the power corridors, which could perpetuate their higher tax burden.
Conclusion:
The disparity in income tax contributions in Pakistan demands attention and consideration from policymakers. Addressing the economic inequality and ensuring a fair distribution of the tax burden is crucial for sustainable economic growth. By reevaluating tax policies and encouraging transparency, the government can create a more equitable and thriving economic environment for all citizens.
Source: The Express Tribune
