Senate Rejects Tax Hikes on Salaried Class, Pushes for Fairer System

Pakistan's Senate has taken a decisive step towards a more equitable tax system, rejecting proposed increases for salaried workers in the 2024-25 budget. This move comes after a review revealed significant disparities in tax contributions across different sectors.

Unequal Burden on Salaried Class:

The data presented by the Federal Board of Revenue (FBR) exposed a stark imbalance. While the salaried class shoulders a substantial burden, contributing Rs. 375 billion annually, other sectors like exporters (Rs. 90-100 billion) and retailers (Rs. 4-5 billion collectively) pay considerably less. This disparity fueled the Senate's opposition to raising taxes on salaried individuals.

GST and Exporters' Tax Debate:

The FBR proposed an 18% general sales tax (GST) on packaged food items like rice and pulses, but assured that unprocessed food would remain exempt. Additionally, a phased GST on packaged milk and infant milk was suggested, with potential consumer benefits tied to its implementation.

A contentious issue arose regarding exporters' preferential tax rate of 1%. Senator Farooq H. Naek advocated for aligning their tax regime with the normal rate (up to 45%), citing fairness. However, Senator Saleem Mandviwalla expressed concerns about discouraging foreign investment and harming the economy.

Revised Tax Slabs and IMF Demands:

The FBR chairman outlined revised tax slabs for salaried individuals, with modest increases at each income level. He also revealed that the International Monetary Fund (IMF) initially demanded a unified tax system with higher rates, but the FBR successfully negotiated lower rates for salaried workers.

Focus on Equity and Broadening the Tax Base:

Senators from various parties, including PML-N's Anusha Rehman, echoed concerns about fairness and the economic impact of increased taxes on salaried individuals. Discussions focused on broadening the tax base and ensuring all sectors contribute their fair share. The Senate rejected FBR's proposal for a fixed capital gains tax and sending parliamentarians' records to Nadra for tax collection.

Call for Balanced Fiscal Policies:

The Senate's stance highlights the need for balanced fiscal policies that promote economic growth and stability. The discussions emphasized the importance of fair taxation across all sectors, ensuring a sustainable and equitable revenue generation system for Pakistan.

This article was published at Senate Rejects Tax Hikes for Salaried Class in Budget 2024-25