M.Sheroz Khan Lodhi
Budgets seem to be all about providing largesse to the poor and incentives to the industry while reiterating the constraint of being fiscally prudent. Any talk of addressing the issues confronting the middle class is skipped and never quite addressed. The salaried class is the backbone of the economy, providing skilled labour, professional services, and human capital to various industries and sectors. They are also the most compliant taxpayers, as their income tax is deducted at source by their employers.
On the other hand, the agricultural sector, which contributes 20% of the GDP, paid less than 1% of the total income tax. Similarly, the real estate sector, which has an unpaid potential of Rs 500 billion, and the wholesale and retail businesses, which have an unpaid potential of Rs 234 billion, are largely untaxed or under-taxed. There is a basic principle: there will be no income tax in our society unless justice is established.
Our salaried class is under serious financial stress, as their disposable income is shrinking and their living expenses are increasing. The inflation rate in Pakistan reached 29% in November 2023, which is much higher than the core inflation rate of 18.5%. This situation is not only unfair but also unsustainable.
The salaried class cannot bear the brunt of the fiscal adjustment alone, while other segments of society enjoy tax exemptions and concessions. Our fiscal deficit soared to 7.6 percent of GDP. We have to see in Argentina that they have imposed a wealth tax for the next two years. We also have to think about how long we will depend on these unjustified taxes.
There is no rocket science in this thing. The salaried class cannot be expected to pay more taxes when they are already paying more than their fair share. The salaried class cannot be ignored or exploited when they are essential for the economic development and social stability of Pakistan.
The basic question is whether we achieved the tax target. How did we achieve it? If we achieved this by raising the tax target by taxing the salaried class unjustifiably or by taxing high-consumption commodities by raising the general sales tax, then, in my opinion, this is not a big success for us.
The salaried class already pays 200% more taxes than exporters and retailers, and the government is considering putting further burden of taxes on this class. If the government does so, it will be a total disaster for the salaried class, and a big question mark will be on the intention and will power of the government and its concerned departments as well. In my opinion, the government needs to follow a one-line policy for further enhancement of tax revenue and tax spread on the basis of “taxing the untaxed or low-taxed incomes and documenting the undocumented economy.”
