Pakistan’s salaried employees are now carrying almost one-third of the country’s total personal income tax (PIT) burden — the highest share recorded so far. Recent data from official fiscal reports show a dramatic rise in tax contributions from the working class, highlighting both stronger tax enforcement and widening income pressures on formal-sector workers.
Tax Contribution Triples in Four Years
Between FY2020–21 and FY2024–25, income tax collected from salaried workers rose from PKR 152 billion to approximately PKR 555 billion, representing a 265% increase over four years. Despite this, overall PIT as a share of total national tax revenue dropped from 28% to 16%, suggesting that while the state is collecting more from salaries, broader tax collection has not kept pace.
This means the salaried class is becoming the government’s most reliable taxpayer segment — largely due to strict payroll deductions and automated tax systems.
Why Salaried Workers Are Paying More
Experts point to several drivers behind the surge:
- Payroll integration and withholding reforms: Companies are now required to digitally file employee salary data, ensuring automatic tax deductions.
- Updated tax brackets: Adjustments to tax slabs in the recent federal budget increased effective rates for mid- to high-income earners.
- Limited tax expansion elsewhere: Informal sectors, which make up a major part of Pakistan’s economy, remain under-taxed, leaving the formal workforce to fill the gap.
Economist Ali Khalid told Pixel Pakistan, “The salaried segment is the easiest to tax — their income is traceable and deductions are automatic. But that also means they end up paying for those who remain outside the net.”
The Fairness Debate
While higher revenue from salaried earners reflects progress in documentation and compliance, it has also reignited debate on fairness within Pakistan’s tax system.
Many employees argue that the system penalizes those in formal employment while letting wealthier individuals and traders in the informal economy escape with little to no taxation. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has also called for broadening the tax base, urging the government to bring more sectors under formal scrutiny instead of relying on the same salaried bracket.
A Lahore-based IT professional told Pixel Pakistan, “Every month, my salary slip shows more deductions, but I still pay the same indirect taxes on everything I buy. It feels like we’re paying twice.”
A Sign of Progress — and Pressure
On the upside, consistent growth in salaried-tax revenue indicates a more transparent and traceable economy. It also helps Pakistan build fiscal credibility at a time when international lenders, including the IMF, have emphasized improved tax collection as a condition for financial stability.
However, the sustainability of this model depends on whether other sectors — such as real estate, retail trade, and agriculture — begin contributing more meaningfully. Without that, experts warn, the tax system risks overburdening the limited base of formal employees.
What Lies Ahead
As Pakistan continues digitalizing its tax system, policymakers are now exploring:
- Expanding e-filing requirements to small and medium enterprises (SMEs).
- Introducing incentives for self-employed individuals to declare income voluntarily.
- Reducing pressure on fixed-income workers through gradual slab adjustments.
Tax authorities also plan to enhance compliance via digital ID based verification, linking income data with national databases to catch unreported earnings.
Pakistan’s salaried professionals now contribute 29% of total personal income tax, marking a major structural change in how the government collects revenue. While this reflects better enforcement and data transparency, it also exposes the uneven weight carried by formal workers.
For the salaried class, the message is clear — they are the backbone of Pakistan’s tax machinery. For the government, it’s a reminder that true reform means expanding the tax net, not deepening it on the same few shoulders.
