Pakistan’s salaried class has quietly become the country’s most reliable taxpayer and, arguably, its most financially burdened segment. At a time when inflation, electricity tariffs, petroleum prices and basic living costs continue to rise, salaried individuals are carrying a growing share of the country’s documented tax burden while receiving limited relief in return.
TAXATION
Pakistan’s salaried class has quietly become the country’s most reliable taxpayer and, arguably, its most financially burdened segment. At a time when inflation, electricity tariffs, petroleum prices and basic living costs continue to rise, salaried individuals are carrying a growing share of the country’s documented tax burden while receiving limited relief in return.
Unlike many sectors of the economy where income can remain undocumented or underreported, salaried employees have their taxes deducted directly from their monthly salaries before they even receive their salaries. There is no room for negotiation, concealment or delayed compliance. This has made salaried individuals one of the easiest and most dependable targets for revenue collection by the Federal Board of Revenue (FBR).
Recent FBR data reflects the scale of this contribution. According to official tax collection figures and budget documents, salaried individuals contributed more than Rs350 billion in income tax during FY2023-24, compared to around Rs263 billion only a few years ago. The increase has been driven largely by higher tax rates, inflation-linked salary adjustments and stricter withholding mechanisms. In contrast, many influential sectors with far larger asset bases continue to contribute proportionately less to the documented tax system.
Pakistan’s broader tax structure highlights this imbalance even more clearly. According to the World Bank’s Pakistan Development Update (2024), Pakistan’s tax-to-GDP ratio remains around 9-10 per cent, among the lowest in South Asia, reflecting the country’s narrow tax base and heavy dependence on indirect taxation. The country consistently struggles to broaden its tax base despite having a population of more than 250 million. FBR data repeatedly shows that a significant percentage of registered taxpayers either file nil returns or remain outside effective enforcement mechanisms altogether.
According to the Pakistan Economic Survey 2023–24, indirect taxes, including GST, petroleum levies, customs duties and electricity-related charges, accounted for a major share of national revenue. Meanwhile, the Federal Budget 2025–26 further increased reliance on indirect taxation and withholding measures, continuing the pressure on documented and salaried taxpayers.
Salaried individuals in Pakistan also face what many describe as a form of double taxation. After paying direct income tax through salary deductions, they are again heavily taxed through indirect mechanisms on almost every aspect of daily life. From GST on essential goods to petroleum levies, electricity bills, fuel adjustment charges, mobile taxes, internet charges, banking transaction taxes, and withholding deductions on utilities and financial services, the same documented segment continues to contribute repeatedly to state revenue. In practical terms, a salaried person is taxed while earning, taxed while spending, and taxed while saving, further intensifying financial pressure on middle-income households already struggling with inflation and declining purchasing power.
The problem is not taxation itself. Citizens understand that taxes are essential for running the state. The real issue is fairness and the proper utilisation of collected taxes on a priority basis, as the current system appears to collect from the poor while spending on the richest. Large segments of Pakistan’s economy, including wholesale trade, retail markets, real estate and high-income agricultural activities, remain either under-taxed or weakly documented, with the support of officials from relevant departments. Agriculture contributes nearly 20 per cent to Pakistan’s GDP according to the Pakistan Bureau of Statistics, yet direct agricultural income tax collection across provinces remains extremely low.
Similarly, several commercially active organisations and foundations that operate and generate substantial profits in sectors such as healthcare, manufacturing, real estate and education continue to benefit from exemptions, concessions or preferential treatment under various legal arrangements. Economists and tax experts have repeatedly questioned whether such exemptions remain justified when ordinary salaried individuals are facing increasing financial pressure.
Pakistan’s salaried class should not continue to serve merely as the easiest source of revenue collection. It represents the backbone of the country’s formal economy, and without meaningful reforms, public frustration and economic uncertainty will continue to grow
The salaried middle class increasingly feels trapped in a system where compliance is compulsory only for those whose incomes are already fully documented. Teachers, engineers, doctors, bankers, university faculty, IT professionals and private-sector employees often find themselves paying a higher effective tax burden than many wealthier but undocumented segments of society.
This frustration is deepened by the visible absence of quality public services. Despite paying taxes regularly, most Pakistanis continue to depend on private healthcare, private schools, private transport, and personal housing arrangements because public systems remain inadequate or inaccessible.
According to the World Bank, Pakistan spends around 1.7-2.0 per cent of GDP on education and less than 2.0 per cent on health, both significantly below international recommendations for developing countries. Public hospitals remain overcrowded, government schools face quality and infrastructure challenges and urban transport systems remain poorly developed in most cities.
For middle-income households, the financial pressure has become overwhelming. Inflation in Pakistan crossed 30 per cent during recent years according to the Pakistan Bureau of Statistics, while electricity tariffs and petroleum prices reached historic highs. Fuel adjustment charges, petroleum levies, and utility surcharges further reduced household purchasing power.
The State Bank of Pakistan has also repeatedly warned about declining household savings and weakening purchasing capacity due to inflationary pressures. Many salaried families now struggle to manage school fees, rent, healthcare expenses and utility bills despite having stable employment. What was once considered a financially secure middle class is gradually slipping into economic vulnerability and going further down to the poverty line.
Young professionals are among the most affected. Many highly educated Pakistanis increasingly consider migration as the only path toward financial stability and professional growth. According to the Bureau of Emigration and Overseas Employment, hundreds of thousands of Pakistanis leave the country annually for overseas employment, including doctors, engineers, IT specialists and skilled workers. Economic uncertainty and declining purchasing power remain among the major reasons behind this growing brain drain.
Another important public concern relates to the use of taxpayer money. Citizens often observe that while ordinary people struggle with inflation and declining living standards, large portions of public revenue continue to fund extensive state expenditures, official privileges, allowances, vehicles, residences, utilities, and pensions for public office holders and senior institutions.
The issue is not about opposing state institutions, which remain essential for governance and national stability. Rather, the concern revolves around equitable burden-sharing and public accountability. Many citizens feel that the people financing the system are not necessarily the ones benefiting from it.
Pakistan urgently needs structural tax reforms that prioritise fairness instead of repeatedly targeting the same documented segments. The country cannot achieve long-term fiscal stability by depending primarily on salaried taxpayers and indirect taxes paid by ordinary consumers.
The first step should be broadening the tax base through stronger digital documentation and transparent enforcement across all sectors of the economy. Untaxed or undertaxed sectors, including high-income agricultural activities, wholesale trade, luxury real estate and informal businesses, must contribute proportionately to national revenue generation.
The government should also review tax exemptions and concessions granted to commercially active entities. Any institution generating substantial commercial income should contribute fairly to the national exchequer regardless of institutional status or influence.
Equally important is providing meaningful relief to the salaried class. Income tax slabs should be revised in line with inflation and cost-of-living realities. Tax credits or deductions for healthcare, education, housing, and transportation expenses could help reduce pressure on middle-income families.
Most importantly, citizens must see visible improvements in public services. Better healthcare, quality education, efficient transport systems, affordable housing, clean drinking water and reliable municipal services are essential for rebuilding trust between taxpayers and the state.
A fair taxation system is not simply about increasing revenue collection. It is about creating a social contract where economic responsibility is shared equally, and citizens can see the benefits of their contributions. Pakistan’s salaried class should not continue to serve merely as the easiest source of revenue collection. It represents the backbone of the country’s formal economy, and without meaningful reforms, public frustration and economic uncertainty will continue to grow.
The writer is affiliated with the Systems Research Group unit at the Sustainable Development Policy Institute (SDPI). The views expressed are solely his own and do not necessarily reflect the official position of SDPI.
