I.   Background (BG)

This refers to the related Important TLQCs in trail, blue, italic and double line (a) 3087 of 18.4.25 about Tax Office to remain open on Saturdays for Targets, KCV & KCR (b) 3084 of 15.4.25 about JI, PAFO, KC & SCA efforts continue to reduce Salary tax, KCR and Your Action (c) 3081 of 9.4.25 about Urgent & Important for HR, Finance & Tax Heads - HAPT

2.   We also refer to several Other TLQC including (a) 3073 of 4.4.25 about Still Overburdened Salaried class VS Retailers & Exporters (b) 3076 of 5.4.25 about Salaried class Tax 1350% more than Retailer and Overall 515B Shortfall (c) 2573 of 15.12.23 about EIS / POS Rules Changes Analysis - SRO 1788

II.   Updated Commentary – Executive Summary

There were no discussions with the IMF to lower the tax burden of the salaried class, sources said. When contacted, FBR Spokesperson Dr Najeeb Memon said that the government would review the taxes on the salaried class in the upcoming budget exercise.

Where the government did not feel the pain of the salaried persons, it tried to negotiate with the IMF to reduce the tax burden of the real estate sector. The IMF did not accept the government's demand and has, for now, kept the rates unchanged.

For the month of March, the tax target is Rs 1.220 trillion that the FBR is again going to miss by a wide margin. Till 22.3.25, the FBR had collected Rs 515 billion, leaving it with a gigantic task of generating Rs 704 billion within this week. Friday will be the last working day before Eid holidays.

III.   DETAILS

1.   Further to KQU 3301, being an important matter, we would inform you about Salaried class coughs up Rs331b in taxes (Attachment 3088.1).

2.   The salaried class paid staggering Rs 331 billion income tax in the eight months of the current fiscal, which is 1,350% more than the taxes paid by retailers, but still not enough for the government to seek relief from the IMF for the marginalised segment.

3.   The total income tax contributions by the salaried people during July-February period of this fiscal year were Rs 120 billion or 56% higher than Rs 211 billion collected during the same period of the last fiscal year.

4.   The government of Prime Minister Shehbaz Sharif had targeted the collection of Rs 75 billion additional from the salaried class for the full fiscal year 2024-25. The figure is already Rs 120 billion higher and still four months are remaining in the close of the fiscal year.

5.   In the last year, the salaried class paid Rs 368 billion in taxes. But despite this backbreaking burden on the salaried people, who pay taxes on the gross income without adjusting expenditures, the government did not take up the issue of lessening this burden with the IMF during the recently held talks.

6.   There were no discussions with the IMF to lower the tax burden of the salaried class, sources said. When contacted, FBR Spokesperson Dr Najeeb Memon said that the government would review the taxes on the salaried class in the upcoming budget exercise.

7.   In contrast to Rs 331 billion paid by the salaried persons, the retailers, mostly unregistered, contributed merely Rs 23 billion on account of withholding income tax on their purchases. The amount of tax that the traders paid under section 236-H was 1,350% less than the taxes paid by the salaried persons.

8.   The wholesalers and distributors also paid Rs16 billion withholding tax in eight months and ironic though almost half of them were unregistered with the FBR, said the sources.

9.   In the budget, the government had imposed 2.5% withholding tax on the traders in the hope that this would force them to come in the tax system.

10.   The increase in the rate did help collect Rs12 billion more from the traders but the intended objective could not be achieved. The traders passed on the cost of the additional tax to the end consumers.

11.   The government's Tajir Dost scheme to bring in 10 million traders in the net also failed badly and it has now stopped talking about it. The government was supposed to collect Rs 50 billion from the retailers under the scheme, but it ended up collecting peanuts.

12.   The sources said that the FBR admitted before the IMF that the traders and the jewellers were the two hard nuts to crack. The FBR also confessed before the IMF that due to major design flaws, the Tajir Dost Scheme had failed.

13.   The IMF was briefed that the large traders also stopped the smaller ones from joining the scheme and as a result it could not expand the scheme to 43 cities. The FBR's plan to bring a minimum of 10 million retailers in the net had flopped, the IMF was told.

14.   The sources said that the Finance Minister Muhammad Aurangzeb had asked the FBR to begin the exercise to review the salaried class taxation with an objective to provide some relief. However, no such discussions took place with the IMF.

15.   In last June, the government massively increased the tax burden of the salaried persons by reducing the number of slabs, which put abnormal burden on the middle and upper middle-income groups. The maximum 35% rate is now unfairly charged at Rs 500,000 monthly income and a 10% surcharge is also imposed, which takes the total tax rate to 38.5% for the highest slab.

16.   Where the government did not feel the pain of the salaried persons, it tried to negotiate with the IMF to reduce the tax burden of the real estate sector. The IMF did not accept the government's demand and has, for now, kept the rates unchanged.

17.   The details showed that non-corporate sector employees paid Rs 141 billion income tax this year, which is higher by Rs 42 billion or 43%. The corporate sector employees paid Rs 101 billion in income tax, also higher by Rs 37 billion or 56%.

18.   The provincial governments' employees paid Rs 57 billion, up Rs 28 billion or 96%. The federal government employees paid Rs 34 billion, again higher by Rs 14 billion or 66%.

19.   For the current fiscal year, the IMF has given Rs 12.97 trillion tax target to FBR, which has already sustained Rs 605 billion shortfall in eight months despite collecting Rs 331 billion from the salaried persons.

20.   For the month of March, the tax target is Rs 1.220 trillion that the FBR is again going to miss by a wide margin. Till 22.3.25, the FBR had collected Rs 515 billion, leaving it with a gigantic task of generating Rs 704 billion within this week. Friday will be the last working day before Eid holidays.

IV.   Multiplication

If Yours and Public support will continue via Associations, Institute, Organization to the Government directly and Indirectly as well as PAFO, SCA and with Invitation to your friends & relatives to be a part of this great struggle based on regular increase in Jamaat e Islami membership form being filled, then Salary tax will also be reduced (like first phase reduction in tax.

JI expects your support and be a Member of the JI, whose current workers are taking risks and working in your Favour; and Against Unreasonable Salary Tax inspite of huge increase Parliamentarian Salaries. 

Otherwise, be ready for constant increases in Salary Taxation & Corruption, No more Electricity Bills reduction with different methods, inspite of Govt claims of New Agreement and Huge Savings, nothing will be transferred to the public by Salary taxation & Electricity bills reduction.

V.   Further Details & Services 

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Advisory, Statement or Return Filing or Review services, or related accounting matters like the above, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com. Your Goodself may continue to get other services from your current Tax & Legal Advisors.