Govt made significant efforts to protect salaried class from taxes: Finance Minister

Federal Minister for Finance and Revenue Muhammad Aurangzeb has stated that the government will review measures to protect the salaried class following the increased tax burden introduced in the Budget 2024-25.

Aurangzeb said that the government tried to “ring-fence the salaried class as much as it could.” He acknowledged the impact of the new tax measures on this group, highlighting his six years of experience in understanding the nuances of tax brackets, super tax, and capital value tax (CVT).

“We made significant efforts to protect them,” Aurangzeb said, emphasising that individuals earning less than Rs600,000 annually remain exempt from income tax.

He added that the highest tax bracket of 35 per cent was also shielded from additional taxes to prevent talent from leaving the country.

Aurangzeb mentioned ongoing reviews to assess potential relief for the tax slabs, aiming to balance the need to increase tax revenue from Rs9.4 trillion to Rs12.9 trillion with the burden on the salaried class.

“We will generate Rs1.5 trillion through additional revenue measures by removing exemptions and imposing more taxes,” he noted, revealing that the overall impact of these measures on the salaried class is approximately Rs70 billion out of the Rs1.5-1.6 trillion in new taxes.

The Finance Minister’s comments come after the government’s decision to increase tax liability for individuals earning more than Rs50,000 monthly in the Budget 2024-25.

The Finance Bill 2024 indicates that the highest impact will be on those earning Rs6 million annually (Rs500,000 monthly), with a tax liability increase of Rs22,500. Interestingly, those earning Rs12 million annually (Rs1 million monthly) will face the same increase.

On Friday, lawmakers, including those from allied political parties, criticised the government for imposing additional taxes on the salaried class while providing subsidies and exemptions to the real estate and agriculture sectors.

During the budget debate in the National Assembly, they argued that the heavy taxation on the salaried class is irrational and could exacerbate brain drain. They called for substantial revisions to the federal budget to offer more relief to the masses and extend the tax net to previously exempt sectors.

The salaried class in Pakistan has seen a significant increase in tax burden over recent years as the government targets what many consider “soft targets” in its efforts to boost the tax-to-GDP ratio.

The government has faced criticism for focusing on formal sectors and not adequately addressing the informal economy.