LAHORE: Chairman Federal Board of Revenue (FBR) Rashid Langrial has acknowledged that Pakistan’s salaried class bears a disproportionately high tax burden compared to many regional countries, with income tax rates reaching up to 35 percent for individuals earning more than Rs4.1 million annually.
Speaking at ThinkFest in Lahore, Langrial said that although the headline tax rates appear high, the deeper issue lies in weak tax compliance across various professional sectors. He explained that a person earning Rs10 million per year pays around 27 percent in income tax, but salaried individuals have little room to hide their income, unlike many self-employed professionals.
He highlighted the example of doctors to illustrate the imbalance in the tax system. Out of approximately 150,000 doctors in Pakistan, only 55,000 file tax returns, and most of those declare annual incomes below Rs2 million, resulting in negligible tax payments. In contrast, salaried individuals are taxed at source, leaving them no option to underreport income.
Langrial noted that low compliance has persisted despite changes in tax rates over time. He stated that even when income tax rates were lower in previous years, compliance among professionals remained weak. Over the past 15 years, and particularly during the last two to three years, tax rates have increased steadily, further intensifying pressure on documented segments of the economy.
Discussing household-level indicators, he said Pakistan has around 42 million households, of which nearly 7 percent own air conditioners. According to his assessment, at least 3.2 million of these households should be within the tax net, highlighting the significant gap between economic capacity and actual tax contribution.
On FBR’s recent performance, Langrial shared that by the end of the June 2025 tax year, 4.9 million tax returns were filed. This figure rose to 5.9 million in the current year, reflecting the addition of one million new filers. However, he pointed out that around 300,000 of these new filers declared themselves non-taxable. Despite this, the tax-to-GDP ratio improved from 8.83 percent to 10.33 percent.
He stressed that expanding the tax base requires better documentation of the economy, particularly inter-provincial trade and services. He also criticized the existence of multiple tax regimes, stating that these were shaped by trader lobbies that focused more on policy influence in Islamabad than on improving productivity.
Langrial warned that without growth in exports, Pakistan’s economic progress would remain constrained. While the government has taken steps to reduce energy tariffs and make local production more viable, he noted that industry groups have rarely demanded meaningful tariff reductions.
Addressing sales tax, he pointed out that Pakistan collects around 3.5 percent sales tax on goods, compared to India’s 6 percent, despite similar economic structures. He revealed that the income tax gap for around 670,000 individuals stands at Rs1.2 trillion, reflecting widespread underreporting.
He also highlighted cases of misreporting and evasion, noting that over 182,000 individuals purchased property without filing tax returns. Monitoring systems introduced in sugar mills under the Export Facilitation Scheme generated an additional Rs1.6 billion in revenue within a year.
Concluding, Langrial emphasized zero tolerance for corruption within FBR and reiterated that tax rates should be reduced only through fair burden-sharing rather than exemptions for powerful groups.
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