Calls for tax relief for Pakistan’s salaried class are growing ahead of the federal budget as concerns rise over what many see as an unequal tax structure that places a heavier burden on documented income earners than on other sectors of the economy.

The debate gained momentum after the government introduced a simplified tax regime for retailers, allowing eligible shopkeepers with annual sales of up to around Rs200 million to pay a fixed tax of 1% on turnover under a simplified filing system.

Retailers get simplified tax scheme

Under the new arrangement, small traders can opt for a flat-rate tax structure with easier compliance requirements. The move is aimed at encouraging registration and documentation of businesses that largely operate in the cash economy.

Critics, however, argue that no comparable relief has been announced for salaried individuals, who continue to pay taxes under a progressive income tax system with rates ranging from 1% to as high as 35% for top earners.

Salaried workers remain highly documented

Unlike traders, salaried employees have taxes deducted directly from their monthly pay through the withholding tax system. This mechanism ensures near-total compliance, leaving little room for underreporting or tax avoidance.

According to available data, the salaried class contributed Rs420 billion in income tax during the first nine months of the outgoing fiscal year, highlighting its significant role in national tax collection.

Growing concerns over tax fairness

Economists and taxpayers argue that salaried individuals not only pay income tax but also face multiple indirect taxes on electricity bills, mobile services, fuel, and daily consumption items.

As the government prepares to unveil the new budget, many expect measures aimed at reducing the burden on fixed-income earners. Analysts warn that failing to provide meaningful relief could further weaken confidence in the country's tax system and discourage voluntary compliance in the future.