Pakistan’s salaried class is paying more in income taxes than several wealthier sectors combined, highlighting imbalances in the country’s tax system as the government struggles to expand its revenue base.
Data from the Federal Board of Revenue shows that salaried individuals paid Rs. 365 billion in income tax from July to February of the current fiscal year, compared to Rs. 332 billion during the same period last year. The increase comes despite limited changes in tax slabs, showing the growing dependence on documented income groups.
The contribution from salaried workers now exceeds the combined taxes paid by retailers, wholesalers, exporters, and the real estate sector, which have often been criticized for underreporting income and remaining outside the formal system.
This gap points to a broader structural issue, where tax enforcement is stronger in the formal economy but weaker in the undocumented sectors. Over the past five years, tax payments from salaried individuals have increased by more than 400 percent, according to economic analysis.
In comparison, retailers contributed just over Rs. 16 billion in taxes during the same period, while wholesalers and distributors paid around Rs. 35 billion. This imbalance has raised concerns about fairness in the tax system and the government’s ability to bring influential sectors into the tax net.
According to the State Bank of Pakistan, out of around 5 million micro, small, and medium enterprises, only about 179,000 retailers are registered under the point-of-sale system, showing the large size of the undocumented economy.
Efforts to expand the tax base have made limited progress so far. Authorities have not yet finalized new measures to bring retailers into the system for the upcoming 2026–27 budget, despite ongoing discussions with the International Monetary Fund.
Economists warn that continued reliance on salaried workers and formal businesses could increase perceptions of unfairness, while limiting the government’s ability to provide tax relief without widening the tax base.
Sectors such as agriculture, real estate, and wholesale trade remain largely under-taxed due to political and administrative challenges. While the government has taken steps to tax high-income pensioners earning over Rs. 10 million annually, their overall contribution remains small.
Experts say that unless more of the informal economy is documented, the tax burden will continue to fall mainly on those already paying taxes.
