Salaried taxpayers demand relief as Pakistan’s burden outpaces regional peers

Pakistan’s salaried class is urging the government to increase income tax exemptions and introduce relief measures, arguing that they shoulder a disproportionate share of the nation’s tax burden compared to regional peers.

In a proposal sent to Finance Minister Muhammad Aurangzeb, the Salaried Class Alliance of Pakistan called for immediate action to revise tax slabs and offer relief to wage earners facing rising living costs and inflation.

Currently, Pakistan’s annual tax exemption threshold stands at PKR 600,000 — significantly lower than comparable figures in neighboring countries. According to data shared with Nukta, the equivalent tax exemption thresholds in India, Vietnam, Nepal, and Bangladesh are PKR 2.34 million, PKR 1.57 million, PKR 1.05 million, and PKR 890,000 respectively.

“This places an inequitable burden on salaried taxpayers and renders the system regressive,” the alliance stated, noting the lack of meaningful deductions in Pakistan’s current tax regime.

The alliance also noted that salaried individuals are among the most transparent and compliant taxpayers, while large sectors of the economy — including real estate, wholesale trade, and informal businesses — remain undocumented and untaxed.

To reduce pressure on salaried workers and ensure more equitable tax policy, the alliance recommended the following measures:

• Revise tax slabs: Restore pre–Finance Act 2024 tax rates and eliminate the 10% additional surcharge, which they describe as penal in nature.
• Raise medical allowance exemption: Increase the medical allowance exemption limit from 10% to 25% in line with current healthcare costs.
• Introduce commuting allowances: Allow a 15% deductible allowance for commuting and work-related expenses.
• Increase exempt income threshold: Raise the tax-free income threshold to at least PKR 1.2 million to reflect the erosion in purchasing power caused by inflation.

According to the alliance, tax collection from the salaried segment surged from PKR 76 billion in FY19 to an estimated PKR 570 billion in FY25.

“While we appreciate the government’s focus on improving revenue collection, this increase has disproportionately impacted salaried individuals already struggling with stagnant wages and historic inflation,” the alliance said.

The removal of tax credits for investments in shares, mutual funds, sukuk, and insurance products under the Finance Act 2022 has further weakened the financial resilience of salaried workers. Meanwhile, the Finance Act 2024 introduced an additional 10% surcharge and increased rates that have worsened the burden.

The group warned that rising taxation is driving a growing number of professionals to seek better opportunities abroad.

They also criticized the elimination of deductions on profits from loans by scheduled banks and finance institutions, stating that it has further diminished financial relief for middle-income earners.

The alliance urged the government to widen the tax base, curb informal sector evasion, and introduce meaningful reform to ease the burden on those already contributing the most.