Finally, the salaried class has spoken

In the first of its kind, the salaried segment of the Pakistani society has decided to go public with their grievances.

A group of professionals, which has identified itself as the ‘Salaried Class Alliance Pakistan’, while addressing a press conference at the Karachi Press Club this week assailed what they called the “unjust and unfair” treatment being meted out to the salaried employees’ of the country with reference to the federal budget announced a few days back. They urged the Supreme Court to take suo motu notice against this ‘injustice’.

It is evident that noting is expected to change in their favour as their plight has failed to attract the attention of the federal government and the IMF (International Monetary Fund) in the concluding budget session - to be wrapped up by end June.

Nor can the Supreme Court help provide relief, apart from advising the government to take a sympathetic approach to the plight of the salaried class.

The alliance says taxes on salaried class have been increased because the government knows this class of taxpayers cannot agitate.

The members of the alliance said the salaried people are an easy target for the government because they, unlike associations or groups, cannot block roads and call shutter-down strikes.

Nevertheless, short of street agitation, the alliance leadership have spoken their mind and conveyed to the government the consequences of further taxing the salaried class.

In the process, they have also jolted the consciousness of the government, flaying the government for not taxing the taxable on account of their influence on country’s politics and economy.

The Alliance Pakistan has stated: “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.

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“.

A woman member of the alliance was more vocal and highlighted the fact that the government has 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 said.

She also stated that many small businesses are now paying their employees in cash, due to which informal and undocumented activities are getting a big boost.

A member stated: “It is a case of social injustice in this country. Doctors and lawyers deal in cash, and people employed in informal sectors earn more than Rs 100,000 a month, but they don’t pay taxes. He said that the salaried group doesn’t have a voice in parliament.

There’s no one to speak for the salaried class in the assembly. You will not find a salaried person in the assemblies.

All of them have zamindaar background. When you have no such person in assemblies, how can you raise this issue? It’s not their problem. It’s the problem of that man who puts on a tie and gets on the bus or car to reach his office in the morning, returns home in the evening to pay electricity and gas bills.“

He added that the 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 alliance underscored need 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 judiciously taxed.

The salaried class has spoken but its voice is not loud enough to move those who matter in the corridors of power. This segment of society needs a voice, which matters. This could lead to be a silver lining for the transformation of the political landscape and vote politics of Pakistan.

So far the vast majority of the enlightened middle segment of society, notably the salaried class, opted to stay out of vote politics, giving way to politicians to manoeuvre, manipulate and exploit the masses and move themselves to the houses of parliament without accountability to the electorate.

The active participation of the middle and salaried segment of society into vote politics may significantly influence the current political landscape of the country to turn, albeit gradually, into a system of demand- and issue-based vote politics with some transparency and accountability.

All economies, which have excelled around the globe, are driven by salaried class talent, notably the mid-level younger workforce brimming with skills.

The economic boom of India and China is driven by this category of talent, many of them returned back from overseas to their countries with talent and money to participate in the free and fair business- enabling environment provided by the state.

In Pakistan, however, the reverse is happening with talent moving out of the country, posing a significant loss to the country - a fact of little or no importance to policymakers of the state.

The government, in its unknown wisdom, is losing far more in terms of loss of businesses and industrial growth and the expected revenue.

Skilled and talented workforce is an asset of a nation, which is a key catalyst to mobilize foreign and local investment in a country.

The investor has been hit in the current budget on two accounts; notably, the increase in corporate tax and the raise in income tax of its work force. The vacuum created by the migration of its talented and well trained workforce would be a further hit on its operational capabilities.

In the comment solicited by this writer on the current budget, M. Abdul Aleem, the Chief Executive and Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI), explained the OICCI position and stated:

“OICCI was surprised that against all previous norms and practices the finalisation of the current budget process remained shrouded within the confines of the government functionaries with least engagement of the key stakeholders, notably the OICCI - the largest tax paying body of around 200 foreign investors, who collectively pay about Rs 8 billion daily or about one third of the tax of this country.

As such it is no surprise that the key stakeholders committed to tax contribution re-acted negatively on many proposals ranging from additional tax on salaries to proposed disallowance of 25% of total sales and promotion expenses to foreign investors, taxing the packaged milk, etc.

At the same time, the government has disappointed the nation by not bringing the agriculture income under the federal income tax nor showing commitment to broaden the tax base by collecting due tax from traders and service providers who account for a significant part of the economy.

The tax shortfall arising out of these defaults has been conveniently passed on to the corporate sector.

The government has to truly demonstrate a commitment to bring in all sectors of the economy to tax, put an end to the cash economy, implement end to end digitization and collect tax from all sectors and relieving the corporate sector from bearing the burden of the exempted sector “.

The disappointment of OICCI is quite legitimate as the country desperately needs foreign investment for its economic growth.

The government policy of pushing the salaried class and the corporate sector against the wall is counterproductive and a huge mistake. For a sustainable economy the government needs both —growth and taxes— and the two are complimentary to each other.

In other words, no growth means no new taxes.

The nation’s talent embedded in the salaried class is the resource and backbone for the sustainable growth of any economy. Their migration out of frustration to other countries will undoubtedly benefit these countries at the expense of our own country.

The budget for 2024-25, like last years, is more of a scramble to meet the numbers set by the IMF to qualify for the next Programme and it is a trade-off by setting aside the strategic economic and socioeconomic demands of the country.

Copyright Business Recorder, 2024