ISLAMABAD – Ahead of the upcoming federal budget for Fiscal Year-2026-27, a longstanding debate has once again gained momentum over who actually pays the most taxes in Pakistan and why influential segments of the economy remain largely outside the tax net.
Across the country, millions of salaried individuals pay income tax directly from their monthly earnings. Despite this, they also continue to bear a wide range of indirect taxes in daily life.
From purchasing fuel and mobile phone usage to buying essential food items, taxes are embedded at nearly every stage of consumption, increasing the financial burden on ordinary citizens.
A teacher working at a private educational institution in Islamabad said that even after income tax deductions from her salary, she continues to pay additional taxes on petrol, mobile services, and other essential goods, significantly reducing her already limited disposable income.
Similarly, individuals engaged in online businesses argue that petroleum levies and other indirect charges have further increased their financial pressure.
The government is currently finalising the federal budget for the new fiscal year beginning July 1. However, concerns are growing among the public that, under IMF programme conditions and efforts to reduce the fiscal deficit, the burden of additional taxation may once again fall on already tax-paying segments of society.
The official data shows that a large share of Pakistan’s tax revenue comes from indirect taxes, meaning both low-income and high-income groups often end up paying similar rates on basic goods and services.
Economists say this structure disproportionately affects salaried and lower-income groups, who have fewer avenues to avoid taxation due to complete documentation of their earnings.
According to Federal Board of Revenue (FBR) figures, the salaried class paid more than Rs605 billion in income tax during the last fiscal year. Experts note that this contribution is higher than several major business sectors, including parts of real estate and wholesale trade.
In contrast, the agriculture sector—despite employing a large portion of the population and contributing significantly to the economy—continues to generate limited tax revenue. Economists argue that without bringing large landowners and other influential groups into the tax net, achieving balance in the taxation system remains difficult.
The wholesale and retail sectors are also widely considered under-documented. Although successive governments have attempted to integrate traders into the tax system, results have remained limited.
The experts further point out that thousands of individuals maintain significant bank balances without corresponding declared incomes in tax records. They believe that improved digital monitoring, simplified tax policies, and stronger enforcement could substantially increase revenue without introducing new taxes.
Meanwhile, the business and industrial stakeholders have also raised concerns over the current tax structure, stating that high tax rates, rising energy costs, and financial pressures are discouraging investment and slowing economic activity.
They argue that instead of repeatedly increasing the burden on already compliant taxpayers, the government should broaden the tax base and bring untaxed sectors into the formal economy.
As the budget approaches, salaried individuals, businesses, and the general public share a common expectation: that the government will focus on expanding the tax net rather than imposing additional taxes on those already contributing.
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