Pakistan’s tax system is once again facing criticism for treating salaried employees and traders differently. While the government has recently announced a simplified tax scheme for shopkeepers and small traders, no major relief has been announced for salaried individuals.
Under the new scheme, retailers with annual sales of up to around Rs. 200 million can choose a simplified tax system. They will pay a fixed tax of about 1 percent on their annual sales and face easier filing requirements.
On the other hand, salaried employees continue to pay income tax under a progressive tax system. This means the tax rate increases as income rises, reaching up to 35 percent for higher earners. Some taxpayers may also have to pay additional surcharges.
One of the biggest differences between the two groups is how taxes are collected. Salaried workers have their taxes automatically deducted from their monthly salaries by employers before they receive their pay. This leaves little room for tax avoidance and ensures almost complete compliance.
In contrast, many small businesses and retailers operate largely through cash transactions. Because of this, some businesses can underreport their income or avoid paying the full amount of taxes they owe.
The contribution of salaried workers to government revenues has increased significantly in recent years. During the first nine months of the current fiscal year, the salaried class paid around Rs. 420 billion in taxes, making them one of the largest contributors to the national tax collection.
Many salaried employees believe the current system places a heavier burden on them than on other sectors of the economy. Besides income tax, they also pay various withholding taxes on electricity bills, mobile phone usage, fuel purchases, banking transactions, and other daily expenses.
These additional taxes increase the financial pressure on middle-income households, especially during periods of high inflation when the cost of living continues to rise.
Critics argue that traders and retailers are often offered incentives such as simplified tax schemes, reduced compliance requirements, and protection from strict audits to encourage them to join the tax net. Meanwhile, salaried workers have limited options because taxes are deducted directly from their income every month.
The difference between the tax treatment of salaried employees and traders has sparked widespread debate on social media and among economic experts. Many people believe the upcoming federal budget should provide meaningful tax relief for salaried workers who consistently pay taxes and contribute significantly to government revenues.
As the government prepares to announce the new budget, many salaried employees are hoping for lower tax rates, revised tax slabs, or other measures that could reduce their financial burden and improve fairness within the tax system.
