Govt to see if it can ‘protect’ Pakistan’s salaried class further, says Aurangzeb

Federal Minister for Finance and Revenue Muhammad Aurangzeb has said that the government will look at how the salaried group can be protected after new measures increased its tax burden in the recently announced Budget 2024-25.

Talking to Geo News on Thursday, the finance minister said the government tried to “ring-fence the salaried class as much as it could”.

“I agree,” said Aurangzeb as he responded to a question on taxing Pakistan’s salaried group further. “I have worked for six years, I know what the tax brackets were, what the super tax was, what CVT was imposed.

“We made a lot of effort to protect them.”

Aurangzeb said persons earning less than Rs600,000 annually remained exempted from income tax.

“We also protected the highest bracket of 35%. We could have imposed more taxes on this segment, but they were protected as we feared talent would leave the country,” he said.

“We are reviewing how much relief we can provide to the tax slabs,” he said.

The Finance Minister said as the government targets to increase its tax revenue from Rs9.4 trillion to Rs12.9 trillion, it needs to increase its revenue by Rs3.5 trillion.

“We will generate Rs1.5 trillion through additional revenue measures by removing exemptions and imposing more taxes,” he said.

Aurangzeb shared the total impact of the additional tax measures on the salaried class is around Rs70 billion out of Rs1.5-1.6 trillion.

The remarks come after the government increased tax liability for all persons earning more than Rs50,000 a month in Budget 2024-25.

Tax slabs in Finance Bill 2024 reveal that the highest impact would be on anyone earning equal to or more than Rs6 million a year (Rs500,000 a month). The tax liability for these earners increases by Rs22,500.

Interestingly, the tax increase for salaried persons earning as high as Rs12 million a year (Rs1 million a month) is also Rs22,500.

On Friday, lawmakers including allied political parties lambasted the government for imposing more taxes on the salaried class and facilitating the ‘holy cows’ – especially the real estate and agriculture sectors – through subsidies and exemptions.

Taking part in the budget debate in the National Assembly, they said that the imposition of such heavy taxes on the salaried class is simply irrational, which may lead to an acceleration of brain drain from the country.

They called for drastic changes – through incorporating the budgetary proposals from the MPs – in the federal budget to give more relief to the masses and bring the holy cows under the tax net, as this is the time to tighten the noose around the tax evaders.

Pakistan’s salaried group has seen taxation burden increase massively over the last few years as the government looks at what many call ‘soft targets’. In its attempt to increase tax-to-GDP ratio, it has often come under criticism for taxing Pakistan’s formal sectors and not going after informal sectors enough.