The Federal Board of Revenue has formally acknowledged in its FY25 annual report that income tax obligations for high-income salaried individuals have been substantially elevated under the fiscal measures introduced for the ongoing year. The report, issued on Saturday, outlines a deliberate policy decision aimed at enhancing revenue collection by intensifying the tax load on Pakistan’s salaried segment, particularly those within upper-tier income brackets. According to the document, the adjustment in tax rates was designed to extract a greater contribution from individuals drawing higher salaries, with the maximum tax rate now reaching 35 percent.
The annual report provides a clear account of how the government’s fiscal authorities approached revenue shortfalls by turning to the salaried class—historically one of the most compliant taxpayer groups. The Finance Act 2024 implemented revised tax slabs that tightened the taxable income thresholds while raising rates for higher earners. This recalibration has resulted in a notable rise in the effective tax burden, particularly for individuals whose salaries place them in the upper-income strata. The FBR’s acknowledgment marks a rare moment of candid assessment regarding a taxation strategy that has faced criticism from economists, labour groups, and policy analysts.
Stakeholders across various sectors have repeatedly argued that an over-reliance on salaried taxpayers deepens structural imbalances within the national revenue system. Critics point out that the heavy adjustments introduced in 2024-25 impose disproportionate pressure on documented income while leaving large informal sectors and under-taxed categories relatively unaffected. In addition, concerns have been raised about how steep tax increases on high-salary segments may erode disposable incomes, dampen consumption, and accelerate financial stress within urban working populations. Economic commentaries accompanying the FBR’s report underscore these risks, with some analysts suggesting that the cumulative impact contributes to broader economic stagnation.
The fiscal changes introduced through the Finance Act 2024 are part of a broader revenue-enhancing strategy pursued to meet budgetary commitments and align with international financial benchmarks. However, the FBR’s own admission signals recognition of the growing public concern surrounding the shrinking purchasing power of the salaried class. The report notes that the intention behind the revised slabs was to ensure additional inflow into the national exchequer from a segment that is already fully documented and easily traceable, making enforcement straightforward. While this approach may deliver short-term fiscal support, it also raises long-term questions about sustainability and fairness within the tax regime.
The discussion emerging from the publication of the FY25 annual report reinforces the long-standing debate regarding tax equity, structural reform, and the need for broadening the tax base rather than intensifying levies on those already within the formal system. As Pakistan navigates a complicated economic environment, pressures on salaried individuals continue to reflect deeper systemic challenges that require comprehensive policy responses rather than incremental burden shifting.
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