Is the new Tax Regime in Pakistan Harsh on Lower/Middle-Class Salaried Persons?

The Answer is a Blunt ‘NO’!!

“Tax” has been a very controversial issue in Pakistan over the years. There has been an impression that Governments purposely put a major Tax burden on the Lower & Middle Class Salaried Individuals, whilst giving exemptions to the Corporate Sector, Industrialists & High-earning Individuals.

It is an unfortunate one bitter fact that out of a Workforce of over 60 Million, only around 2 Million pay Taxes, which as per World Standards is ‘Pathetic’, dare I say. In June-1999, Pakistan had a very healthy Tax-to-GDP Ratio of around 14%. In a span of 14 years, Pakistan has one of the World’s Lowest Tax-to-GDP Ratio of around 8.4%. Any state which has a Tax-to-GDP Ratio of 8% is considered to be a Failed State. What we’ve noticed, and very painfully, the ability of the State of Pakistan to collect Taxes has diminished by around 50%, which indicates the decay in our Economic System.

Ever since the new Government of PM Nawaz Sharif took over the reigns, it is being propagated that the Government would not Tax the Industrialists or the Corporate Sector but put the major share of the Burden on the Lower/Middle-Class Salaried Persons to shore up the Government’s Revenues. But, according to the Finance Bill 2013 that was passed by the National Assembly, all these negative propagation have been proven wrong.

The Finance Bill 2013, prepared by the Finance Minister Ishaq Dar, in my opinion, focuses mostly on Taxing the High-Earning Individuals, therefore, instead of 6 Income Tax Slabs, 11 Income Tax Slabs have been introduced to rationalize Tax Collection. The Income Tax Slabs are as follows:

  • Where the Taxable Income does not exceed Rs 400,000, Rate of Tax is 0%.
  • Where the Taxable Income exceeds Rs. 400,000 but does not exceed Rs 750,000, Rate of Tax is 5% of the amount exceeding Rs 400,000.
  • Where the Taxable Income exceeds Rs. 750,000 but does not exceed Rs 1,400,000, Rate of Tax is Rs. 17,500 + 10% of the amount exceeding Rs 750,000.
  • Where the Taxable Income exceeds Rs. 1,400,000 but does not exceed Rs 1,500,000, Rate of Tax is Rs. 82,500 + 12.5% of the amount exceeding Rs 1,400,000.
  • Where the Taxable Income exceeds Rs. 1,500,000 but does not exceed Rs 1,800,000, Rate of Tax is Rs. 95,000 + 15% of the amount exceeding Rs 1,500,000.
  • Where the Taxable Income exceeds Rs. 1,800,000 but does not exceed Rs 2,500,000, Rate of Tax is Rs. 140,000 + 17.5% of the amount exceeding Rs 1,800,000.
  • Where the Taxable Income exceeds Rs. 2,500,000 but does not exceed Rs 3,000,000, Rate of Tax is Rs. 262,500 + 20% of the amount exceeding Rs 2,500,000.
  • Where the Taxable Income exceeds Rs. 3,000,000 but does not exceed Rs 3,500,000, Rate of Tax is Rs. 362,500 + 22.5% of the amount exceeding Rs 3,000,000.
  • Where the Taxable Income exceeds Rs. 3,500,000 but does not exceed Rs 4,000,000, Rate of Tax is Rs. 475,000 + 25% of the amount exceeding Rs 3,500,000.
  • Where the Taxable Income exceeds Rs. 4,000,000 but does not exceed Rs 7,000,000; Rate of Tax is Rs. 600,000 + 27.5% of the amount exceeding Rs 4,000,000.
  • Where the Taxable Income exceeds Rs. 7,000,000, Rate of Tax is Rs. 1,425,000 + 30% of the amount exceeding Rs 7,000,000.

Majority in the Pakistani Labour Force earns in the range of Rs. 10,000 to Rs. 62,500 per month & the Maximum Tax Rate applicable for this Income Range is a ‘Negligible 5%’.

Whereas, in our neighbouring country, India, which has a healthy Tax-to-GDP Ratio of 15% +; the Income Tax Rates are as follows:

  • Where the Taxable Income does not exceed Rs. 200,000, Rate of Tax is 0%.
  • Where the Taxable Income exceeds Rs. 200,000 but does not exceed Rs 500,000; Rate of Tax is Rs. 10% of the amount exceeding Rs 200,000.
  • Where the Taxable Income exceeds Rs. 500,000 but does not exceed Rs 1,000,000; Rate of Tax is Rs. 30,000 + 20.0% of the amount exceeding Rs 500,000.
  • Where the Taxable Income exceeds Rs. 1,000,000, Rate of Tax is Rs. 130,000 + 30% of the amount exceeding Rs 1,000,000.

Pakistan Income Tax Reform introduced in the Finance Act 2013, is more rational & friendlier towards the Lower/Middle-Income Salaried Persons.

The reason there is lot of hue & cry on the Taxation Reforms, is our non-willingness to pay Taxes. Despite not paying Taxes, the Citizens of Pakistan expect the Government to provide them Security, better Economic Conditions, better Infrastructure, better Educational System, and so on and so forth. But how does one expect the Government to provide all these, when it’s Revenues are hit by non-compliance of the Public.

Pakistan is our Country, it’s our primary Social Responsibility to support the Government by fulfilling our Duties & then expect the Government to deliver, and still if it doesn’t, then only can we truly hold them accountable. If we’re to come out of the Menace of Foreign Loans, then every Citizen must stand up & take responsibility to pay their Due Taxes & help the State to stand on it’s own feet.

Courtesy: Tariq Vaid from Pakistan Speaks

15 thoughts on “Is the new Tax Regime in Pakistan Harsh on Lower/Middle-Class Salaried Persons?




    Was’nt I right in my prediction BURGeRO ty PEPSiYO?????

  2. Sounds like you have been dictated by “Munshi” in person what to write … you are all full crap rational explanation and comparison. Not only that you have contradicted yourself in terms of collection but have also ignored all other forms of Taxes and Tax on Taxed Amounts.. First go and read basic principles of Accounts. Afterwards Stop licking the balls of your masters and come out with open analysis instead of throwing your myopic blunt NOs..

  3. @

    You always show while commenting, your actual education and presence of mind. How come seeking loan is equal to begging?

    Borrowing is a Sunnah as well. Will you name the countires who are not borrowing form IMF and other doner agencies? With your education back ground it should not be a difficult task for you.

    Do not get carried away in your hate towards PMLN to lose your balance.

    And. Any comment on the heart burn of yours about the defeat of PTI and Chanda Khan in the recent bi elections? And the white paper that you read and were so impressed with (2500 pages) all goes down the drain because the results have litrelly been repetead. HUN aRAM AE?

    • @Deevav,
      Since you asked for this particular topic so lets stick to it.
      First u said Borrowing is Sunnah:
      Tell me this borrowing is sunnah with interest> I need prove that IMF borrowing is Sunnah otherwise u should admmit that you are not correct.
      Second u said give you countries name who are not borrowing from IMF and other donor agencies.
      I already tgold you Malaysia , your brother Islamic country. n bad times even in 1997 when all teh countries from Thailand, Indonesia, singapore, Korea were in trouble IMF gave loans to save their economy with IMF conditions. Malaysia is the only country who stood up and refuse to accept IMF conditions.
      Now my point is not that PML is borrowing from IMF is necesssary or not but the point is to get votes why lie to people that we will break Kahkol and will not borrow. Be honest and tell.
      They came and print $3B to pay off circular debt ( you have just $6B in hard cash as foreign exchange rest are not liquid) how u can pay $3B+ ( Rs350Billion in circular debt is paid). now Rupee went from 92 to 105. Ok if for argument sake agree it is necessary to stop the circular debt hoping the investment will come in then on what basis you are borrowing $6.6B on interest. MF is not stupid they put conditions and they control you.
      As i said be Honest and say out loud what u will do , donot fool people with Kashkol slogan.
      I am not PML N hater, i actually like their economic policies over others but political policies i donot like.
      Lets have honest discussion to learn from each other.

  4. Prophet Muhammad (pbuh) did borrow money during his life time. However it did not invlove interest RIBA. Moreover, He (pbuh) regularly made dua to seek Allah Tala’s refuge from debt/borrowing and the evil that can come from it.

    It is wrong to equate IMF loan with sunnah. IMF loans involves interest ‘Riba’ clearly forbidden in Islam and other religions as well. So on religious level IMF loans are haram.

    On a non religious level IMF loans come with strict conditions to control and exploit third world countries. Many corrupt governments from third world countries borrow from IMF and squander the money leaving future generations to bear the burden.

    So the question is how IMF loan will be used by our governments.

  5. @

    I agree to your point of view about not borrowing and paying interest. I stand corrected not to relate it to Sunnah.

    However, i still maintain that borrowing from IMF is not Begging. That was the point i wanted to make.

    When you corrected me i had the courage to corrected myself. Unlike some here who find it Extremely Hard to corrct themselves when they utter WRONG ideas about Islam.

  6. @

    You are a man who would argue for nothing for hours.

    And how many countries of the world have you left out of count?

    Borrowing is not like Begging.

    If you cannot understand u are equally dumb like your Heroes mush Tyrant, Chanda Kahn and Altaf the Kala Don of Karachi who is worshipped by people like you. Keep worshiping who cares?

    • @Deevav,
      You agree only because Ali mentioned that IMF loan is not sunnah.
      Anyway , good that you agree.
      Now next point is how many countries.
      I gave you one best example that is Malaysia and todate people acknowledge that. can tell you many like Venezula during 1990’s.
      But i think u will not agree to that also.
      Begging is what? saudi money ? Who give you free money wothout anything in return.
      Look USA they give so much and what they expect in return?
      Same as Saudi they give money and they expect in return as agent of USA. Lopk what they are doing in Egypt.
      All i am saying is these Politician say something for local consumption like Kashkol etc. and then go to IMF and ask for loans.

      You never acknowledge when i mentioned that you aare worng.
      I remind you still of that “OIL Drain” theory that you emphatically write here and when i asked that ” how it is possible that exploring oil in Baluchistan will dry up IRAN oil field ” you kept quiet. so much for you arguments.

      Last para, i think not related to this topic.

  7. @

    It is not POSSIBLE that if some one comes with a correct referene of Quran and Sahih Hadees proving me wrong, i will nots accept it.

    You have talked of all politicians. Does it include IK and Altaf and Mush?

    Lastly may be you are a careless reader. I have told you that all story of oil in Baluchistan in relation to oil in Iran is available in Govt records. All intelligence agencies and politicians who have remained in power know it.

    Same thing as was between Iraq and Iran.

    • @Deevav,
      Ok i agree on the sunnah pount.
      I also gave you exampole as IMF loan as who refuse to accpet and see how they are doing.
      Read Progress of Malaysia…
      The oil story, wow u still think it is correct.
      So much for your knowledge.
      Show me a scientific paper or litereature that shows that if Pakistan take out oil then Iran oil filed will dry or in Iraq and Kuwait.
      You have no idea how the oil field are formed underneath.
      If you get time google it or tell me i will refer you to teh right literature.
      But please DO not spread thisnon sense to scire points with teh illeterate poor people..
      I asked all readres to please tell me if anyone has any literature that explain or confirm what Deevav is saying. I really want to know.

  8. @Deevav,
    I forgot to answer this as u said:
    You have talked of all politicians. Does it include IK and Altaf and Mush?
    Yes that includes all politicians , IK, Altaf, Zardari, Mushraff, Zia, Buttos, Ns or anyone..

  9. @ M Khan & Deevav

    I think you are both right in your own ways.

    Borrowing is not like begging, that is correct.
    However begging at national level is not the same as an individuals begging on the street. People give them Khairat, Sadaqaat without expecting anything in return from them.

    When we talk of a country begging which means asking for aid as oppose to a loan. That aid is also a type of borrowing. Because the country that receives money has to repay the donor country in some other way to promote the donor country’s national interest.

    In Pakistan’s case the term Kashkol can be used for both Borrowing and Begging, I guess, because any loan or aid Pakistan receives from US, Saudi or China comes with strings attached to it.

  10. I do not support Imran khana.but shehbaz shareefs maintaining of status quo of corrupt and cruel system in Pakistan will ensure the end of his career it seems soon.he builds metro bus projects but does not change the system of corruption red tape safarish and rishwat in my below artiocle that how bad the situation is in Punjab.these munafiqeen blow away swat hen system of swat was introduced there and peoples lives got easier but they maintain this system of zulm and cruelty in Punjab .read my article below

  11. “system of zulm in Punjab.example of corruption and inefficiency and zulm in nadra and passport offices in Lahore”.

    recently i tried to renew my ID card and i have been unfortunate enough to spend my entire life in this unjust country i am phobic of clerks and government offices,who humilate you beyond your wildest imaginations if you dont bribe them or use safarish..
    but some “optimistic” people told me that the time of your collage university days matric pass clerks is over and now in nadra and passport office educated BA pass youth have been recruited who are courteous and do not humilate you that much.
    but were these optimist people wrong!now i fondly remember those matric pass clerks of govt offices!who atleast pained you to a degree,but than did your work.but these “educated” youth of nadra and passport office etc humilate you so much and make you so much zaleel that you remember hell and naar e jahannum the entire time you are in their office.

    first their are touts of these nadra and passport office workers,who demand from you 5 to 10 thousand to make “urgent” passport of ID card via “pawa” channel…and if you are mad enough not to bribe them or not go in these offices by some safarish channel than you are “SCREWED”…so badly so that after few weeks of zalalat you start contemplating to leave pakistan and move to tribes where no ID card etc is required..

    these “educated” youth of nadra and passport office are so cruel and so zalim that i have never seen such zalim people in my life.if you did not bribe them or you went without safarish than they will humilate you in unmentionable ways.first day i remained in unbreathable humidity standing upright for 14 hours straight!i got high fever and remained on bed for days,.they kept delaying my very easy document work longer and longer .for no reason at all.once i managed to attest the documents in 2 weeks the nadra guy told me to attest these documents again due to some “minor” glitch…and when i went there again they said that sorry,you got the forms at 8 pm night so again come at 8 pm night (but they were accepting the farms of other pawa and bribe payers)

    after weeks of hard work i am thinking to forget it all as no Allah fearing man has any place in paksitan .so one should say good by to this nation as soon as possible.before hammer hits this unjust system and spares no one…

    than i remembered a hadeeth….prophet (s a w ) said that make ease for people ,and dont create difficulties for people
    prophet (s a w )also said that in end times most of your kids will not be yours,but they wil belong to satan (they have satans seed in them ).sahaba raziallah unhum asked that how will we know which children are ours and which are satans children if we are in that time? prophet replied that you will differentiate satans children by lack of hiya (sharam or modesty) and lack of rehem (lack of mercy)….

    now seeing at present generation all i see is absolute lack of hiyaa and lack of mercy!!!so who are these children anyway and whose nasal they are really?point to ponder

    may Allah free his pious people from this system of zulm soon .amen.!

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