Pakistan’s salaried class has once again emerged as one of the country’s largest taxpayers, contributing approximately Rs633 billion in income tax during the fiscal year 2025-26—far exceeding the income tax paid by exporters and outstripping the contributions of several politically influential sectors of the economy.
According to provisional figures compiled by the Federal Board of Revenue (FBR), the tax authority collected Rs13.01 trillion during the fiscal year ending June 30, 2026. Of this amount, salaried individuals contributed Rs633 billion through income tax deducted at source, compared with Rs585 billion in the previous fiscal year, reflecting an increase of nearly 8.2 percent. In comparison, exporters—despite earning billions of dollars in foreign exchange—paid only Rs174 billion in income tax during FY2025-26, marginally lower than the Rs176 billion collected from the sector in the preceding year.
The figures indicate that salaried employees paid more than 3.6 times as much income tax as exporters. The gap has reignited debate over the fairness of Pakistan’s tax system, which continues to rely heavily on a relatively small pool of documented taxpayers while large segments of the economy remain either lightly taxed or outside the tax net altogether.
Economists argue that the phenomenon reflects a structural imbalance rather than the relative prosperity of salaried workers. Income tax on salaries is deducted automatically under the withholding tax mechanism, leaving virtually no room for concealment or avoidance. In contrast, taxation of traders, retailers, wholesalers, agricultural income and several service sectors remains weak because of limited documentation, widespread cash transactions and political resistance to tax reforms.
The latest figures come despite repeated government pledges to broaden the tax base under the ongoing International Monetary Fund (IMF) programme. Successive administrations have promised to shift the burden away from compliant taxpayers by bringing untaxed sectors into the formal economy. However, progress has remained slow, forcing the FBR to depend largely on salaried individuals and registered businesses to meet ambitious revenue targets.
The contrast with the export sector is particularly striking. Exporters enjoy a range of fiscal incentives, including concessionary tax rates, reduced advance income tax, subsidised financing schemes and preferential energy tariffs, justified on the grounds that exports generate foreign exchange and employment. While such incentives are common internationally, economists argue that Pakistan’s exporters continue to contribute relatively little in direct income tax compared with the burden borne by salaried employees.
Tax experts note that in most successful exporting economies, governments balance export incentives with broad tax compliance across all sectors. Export-led countries such as South Korea, Vietnam and Malaysia rely on competitive tax policies but simultaneously maintain much wider tax bases and stronger enforcement mechanisms than Pakistan. Businesses benefiting from incentives generally remain fully documented and subject to rigorous financial reporting.
Across South Asia, the reliance on salaried taxpayers is less pronounced than in Pakistan because neighbouring countries have broader tax bases and larger corporate tax collections. India, for example, collects substantial revenues from both corporate income tax and personal income tax while maintaining a significantly larger number of registered taxpayers. Although Indian salaried employees frequently complain about bearing a disproportionate tax burden, the country also derives considerable revenue from corporate taxation and indirect taxes through its nationwide Goods and Services Tax (GST) system. Bangladesh and Sri Lanka likewise face challenges in taxing informal sectors, but both have gradually expanded taxpayer registration and strengthened digital tax administration in recent years. Pakistan, by contrast, continues to operate one of the narrowest tax bases in the region. According to the latest OECD Revenue Statistics, the country’s overall tax-to-GDP ratio remains among the lowest in Asia-Pacific, highlighting the limited capacity of the tax system to mobilise domestic resources.
The consequences of excessive dependence on salaried taxpayers extend beyond questions of equity. Economists warn that high taxation of formal employment discourages documentation and reduces disposable incomes for middle-class households already struggling with inflation, rising utility bills and increasing education and healthcare costs. As purchasing power weakens, consumer demand also slows, affecting broader economic activity.
The imbalance also creates incentives for businesses and professionals to remain undocumented. When compliant taxpayers perceive that they are carrying a disproportionate share of the burden while others remain outside the tax net, confidence in the fairness of the tax system declines. This encourages tax avoidance, expansion of the informal economy and greater reliance on cash transactions.
Another drawback is its impact on human capital. Highly skilled professionals increasingly view Pakistan’s tax system as punitive because taxes are deducted before salaries are received while public services—including education, healthcare, transport and municipal infrastructure—remain inadequate. Some economists believe this contributes to the growing migration of skilled workers seeking better opportunities abroad.
The imbalance also constrains economic growth. Since the government relies heavily on a relatively small number of taxpayers, it frequently raises tax rates instead of expanding the tax base. Higher rates increase the cost of doing business, discourage investment and reduce competitiveness without generating proportionately higher revenues. Experts argue that sustainable tax reform requires expanding the number of taxpayers rather than increasing the burden on existing ones. Bringing retailers, wholesalers, large agricultural landowners, real estate transactions and segments of the informal economy into the documented tax system would distribute the burden more equitably while improving revenue collection.
The FBR has repeatedly announced plans to use digital invoicing, electronic payment systems, point-of-sale integration, data analytics and artificial intelligence to identify potential taxpayers. However, implementation has remained uneven, and successive governments have often retreated from comprehensive reforms under pressure from politically influential groups.
The latest figures once again highlight the structural weaknesses of Pakistan’s tax regime. While the salaried class continues to fulfil its obligations through mandatory deductions, many high-income sectors continue to contribute comparatively less to direct taxation. As the government seeks to increase revenues under its fiscal consolidation programme and meet commitments agreed with the IMF, economists argue that genuine tax reform will require shifting the focus from repeatedly taxing compliant citizens to expanding the tax net across all sectors of the economy. Until that happens, Pakistan’s salaried class is likely to remain the country’s most dependable—and most heavily burdened—taxpayer.