The Pakistan Business Council (PBC), the country’s foremost corporate advocacy platform, has issued a stark warning regarding the potential consequences of the proposed budgetary measures on the salaried class.
In a letter dated June 20, 2024, the PBC expressed concerns that these measures would significantly hasten the brain drain in Pakistan.
Drawing on data from the recently released Pakistan Economic Survey 2023-24, the PBC highlighted a substantial increase in the number of highly skilled individuals seeking employment abroad.
The survey revealed that the number of highly skilled persons emigrating from Pakistan rose from 20,865 in 2022 to 45,687 in 2023, marking a 119 per cent increase.
Additionally, there was a 26.6 per cent rise in the emigration of highly qualified professionals and a 2.28 per cent increase in semi-skilled trades during 2023. Unskilled categories also saw an 8.7 per cent increase in emigration.
The PBC underscored that this 119 per cent surge in emigration is alarming, particularly as many of these individuals are experienced, high-quality professionals who are being lost to the formal sector.
The council cautioned that the proposed changes in tax slab rates, especially the earlier application of the 35 per cent top rate, would exacerbate this brain drain.
This warning follows the government’s decision to increase the tax liability for individuals earning more than Rs50,000 per month in the Budget 2024-25. The Finance Bill 2024 outlines that those earning Rs6 million or more annually (Rs500,000 monthly) would face an additional tax liability of Rs22,500.
Interestingly, this same tax increase applies to those earning up to Rs12 million annually (Rs1 million monthly).
The PBC also pointed out that the formal sector not only loses talent due to emigration but also suffers from the shift of professionals to the informal, untaxed sector. The council deemed the proposal to increase tax revenue from the formal sector as unjust.
It argued that, unlike the government which can print money and borrow to fund salary increases for its employees, the private sector would be adversely affected by a higher brain drain as professionals seek lower-taxed environments both within and outside Pakistan.
The PBC concluded by emphasizing that a vast majority of Pakistanis are seeking to move abroad due to inflation and high tax rates. The council stressed that further increasing the tax rate, while considering that salary income is taxed on a gross basis, is an anomaly that needs to be addressed.
