As Pakistan approaches another critical review by the International Monetary Fund (IMF), fresh revenue data has brought the issue of tax equity back into sharp focus. The latest figures reveal a striking imbalance in the country’s tax structure: salaried individuals have paid more income tax in the first seven months of the current fiscal year than three major sectors of the economy combined — exporters, retailers and property buyers and sellers.
According to official data released by the Federal Board of Revenue (FBR), the salaried class contributed Rs315 billion in income tax during the July–January period of fiscal year 2025-26. In contrast, exporters, retailers and participants in the real estate sector collectively paid Rs293 billion over the same timeframe. In simple terms, salaried employees alone contributed Rs22 billion more than these powerful and economically significant segments combined.
The figures are significant not only because of the numerical gap but also because they underscore the structural weaknesses of Pakistan’s taxation system. At a time when the country is striving to expand its tax base and increase revenue collection under IMF-supported reforms, the burden continues to fall disproportionately on documented, formally employed individuals.
The export sector, widely regarded as the backbone of Pakistan’s foreign exchange earnings, made a total contribution of Rs101 billion in the first seven months of FY26. Of this amount, Rs50 billion came in the form of income tax, slightly lower than the Rs54 billion paid during the same period last fiscal year. Exporters also paid Rs51 billion as a one percent advance tax, bringing their cumulative payment to Rs101 billion — identical to their contribution in the corresponding period of the previous year.
While the export sector’s tax payments appear stable, they have not grown despite fluctuations in exchange rates and export volumes. Given that Pakistan’s annual exports of goods and services hover around $40 billion, questions arise about whether the sector’s income tax contribution reflects its full potential. Successive governments have often extended concessions and preferential tax regimes to exporters in order to promote competitiveness, but critics argue that such incentives may also limit revenue mobilization.
The retail sector presents an even more striking contrast. With an estimated three million outlets operating across the country, retail trade represents one of the largest segments of the economy. However, its documented tax contribution remains comparatively modest. Under Section 236G of the Income Tax Ordinance, which involves advance tax on sales to distributors, dealers and wholesalers, retailers paid Rs15 billion during the July–January period of FY26, up slightly from Rs13.5 billion in the same period last year. Under Section 236H, which applies advance tax at the time of sale by distributors and wholesalers to retailers, collections reached Rs25 billion, compared to Rs19 billion in the previous year’s corresponding period.
Although there has been some growth in collections from retailers, the overall contribution from such a vast sector remains limited relative to its size and economic footprint. Documentation challenges, cash-based transactions and weak enforcement mechanisms continue to hinder effective tax collection in this segment.
The real estate sector, often described as politically influential and historically undertaxed, has shown mixed trends. Under Section 236C, which covers advance tax on the sale and transfer of immovable property, the FBR collected Rs105 billion during the first seven months of FY26, a sharp increase from Rs65 billion collected in the same period last fiscal year. This rise suggests greater transaction volumes or improved enforcement on the sales side.
Under the budget framework for 2025-26, property sale tax rates for individuals listed in the Active Taxpayer List (ATL) are structured progressively. Transactions up to Rs50 million are taxed at 4.5 percent, those exceeding Rs50 million but not exceeding Rs100 million are taxed at 5 percent, and transactions above Rs100 million face a 5.5 percent rate. Individuals not on the ATL are subject to a significantly higher rate of 11.5 percent, while late filers face graduated rates ranging from 7.5 percent to 9.5 percent depending on the transaction size.
However, tax collection on property purchases has declined. Under Section 236K, the FBR collected Rs47 billion on the purchase and transfer of immovable property during July–January FY26, compared to Rs66 billion in the same period last year. In the 2025-26 budget, purchase tax rates were reduced to 1.5 percent for ATL individuals on transactions up to Rs50 million, 2 percent for transactions between Rs50 million and Rs100 million, and 2.5 percent for transactions exceeding Rs100 million. While these reductions were aimed at stimulating market activity, they may have contributed to lower overall revenue on the purchase side.
In contrast to these sectors, the salaried class continues to demonstrate consistent and transparent compliance. Salaried individuals from both the public and private sectors paid Rs315 billion during the first seven months of FY26, compared to Rs284 billion in the same period last fiscal year — an increase of Rs31 billion. Taxes for salaried employees are deducted at source through payroll systems, leaving little room for evasion or underreporting. Their incomes are documented, traceable and subject to automatic withholding, making enforcement straightforward and efficient.
This structural difference is at the heart of the tax imbalance. While large segments of the economy operate in partially documented environments where compliance depends on enforcement capacity and regulatory will, salaried employees have no such flexibility. The result is a taxation system heavily reliant on a relatively small, formally employed segment of the population.
As Pakistan seeks to meet IMF benchmarks and stabilize its fiscal position, expanding the tax base remains a central policy challenge. The country’s tax-to-GDP ratio continues to lag behind regional peers, and successive governments have pledged to bring more sectors into the formal net. However, meaningful reform requires political will, improved documentation, digitalization of transactions and stricter enforcement mechanisms.
The latest revenue figures send a clear message: despite being one of the smaller segments in terms of overall economic power, the salaried class continues to shoulder a disproportionately large share of the country’s income tax burden. Unless structural reforms address documentation gaps and broaden participation across sectors, the pressure on compliant taxpayers is likely to intensify.
For policymakers, the challenge is not merely to increase revenue but to do so in a way that ensures fairness and sustainability. A more balanced system — where exporters, retailers, real estate players and other influential sectors contribute proportionately — would not only improve fiscal stability but also restore public confidence in the tax regime. Until then, the numbers suggest that Pakistan’s salaried workforce remains the most dependable pillar of its revenue system.