The salaried class has launched a campaign against the heavy taxation of salaried individuals under the Finance Act 2023.
In this regard, the salaried class under the banner of “Save the Salaried Class” has launched a country-wide campaign.
In a letter addressed to Finance Minister Ishaq Dar, the representative highlights concerns regarding the recent implementation of additional direct taxation measures on the salaried class. Specifically, the letter addresses the 2.5 percent tax increase and modifications made to income slabs.
These changes have severely impacted the financial burden on salaried individuals, stated the letter.
“The above increase is over and above the exorbitantly high tax burden already passed to the salaried class via Finance Act 2023 where not only the tax rates were increased substantially, but also several tax credits were withdrawn,” it added.
The salaried class is already grappling with the harsh realities of high inflation, increased GST, elevated petroleum levies, escalating energy costs, and limited employment opportunities. The proposed tax rate hike and alteration of income slabs will significantly reduce their net disposable income, further straining those who are already struggling to make ends meet.
Thus, the proposed changes will severely impact the salaried class.
The letter further stated, “Moreover, the substantial devaluation of the Pakistani rupee against major currencies has resulted in a significant decrease (over 50 percent) in the purchasing power of the salaried class. They are finding it increasingly challenging to meet their daily expenses and manage their households.”
It further added, “It is crucial to note that private sector employees, who constitute the majority of the workforce, have not experienced salary increases in line with the escalating inflation rates. In contrast, government employees and select sectors have seen their incomes rise, exacerbating the income disparity between different segments of society.”
Unlike businesses in corporate, industry, trade, and service sectors, salaried individuals are not allowed to claim their expenses against their income, further limiting their ability to manage their finances effectively.
It is worth highlighting that in the previous budget, the government withdrew tax shields on investments, adding to their financial burdens. Additionally, in prior budgets, major claimable expenses for the salaried class have also been eliminated.
Consequently, within a short span of time, the tax burden on the salaried class has significantly increased, creating severe financial hardships. The effective tax rate on the salaried class is the highest among all income sources.
The salaried class has strongly urged the government to explore alternative avenues for generating tax revenue, such as focusing on the wholesale and retail trade sector, which contributes a significant 18 percent to the GDP, but its tax contribution remains disproportionately low at only one percent. Similarly, other sectors are also not contributing sufficiently to tax revenue in comparison to their share in the GDP.
“There are legal matters in bringing those strata of the economy into the tax net but squeezing the already tax-paying sector of the economy is sheer injustice for one sector only. Implementing fair taxation measures across all sectors would ensure a more equitable distribution of the tax burden,” stated the letter.
“The salaried class comprises law-abiding citizens who hold integrity as a fundamental value. They do not engage in illegal income generation. However, the persistently high inflation, which has hovered around 38 percent for several months, has further exacerbated their financial challenges, making it increasingly difficult for them to meet their basic needs,” it added.
“In light of these concerns, we request the finance minister to reconsider the proposed taxation measures and provide much-needed relief to the salaried class by restoring deductible allowances in the computation of their taxable income. This would help alleviate their financial burdens and promote a more equitable tax system,” the letter added.
