Key Takeaways
- Pakistan’s salaried class paid Rs. 144 billion in income tax in Q1, more than retailers and real estate combined.
- Tax collections from property transactions declined by 38% due to a 50% cut in advance tax rates.
- Wholesalers and retailers contributed Rs. 18.4 billion, up just 1.3% from the previous year.
Pakistan’s salaried class paid Rs. 144 billion in income tax during the first quarter of fiscal year 2026-27, significantly outpacing the combined Rs. 54 billion collected from retailers and the real estate sector.
The decline in tax collections from property transactions was notable, with a 38% year-over-year drop to Rs. 35.2 billion, following a 50% reduction in advance tax rates on property sales and purchases.
The government’s decision to halve the tax rate on property purchases from 2.5% to 1.25% and to replace three slabs with a single 2.75% rate for property sales saw a drop in collections from property sales by 42% to Rs. 23 billion, and from property purchases by 31% to Rs. 12.2 billion.
Retailers and wholesalers contributed Rs. 18.4 billion in withholding taxes, with a slight increase of Rs. 244 million, or 1.3%, from the previous year. Wholesalers paid Rs. 6.2 billion, down 10%, while retailers contributed Rs. 11.3 billion, up 8.3%.
The FBR introduced a fixed tax scheme for retailers, but the reported collections indicate little overall growth in withholding taxes from the wholesale and retail sectors.
The disparity in tax collection highlights the significant contribution of the salaried class, with their annual contribution increasing from Rs. 391 billion before the IMF program to Rs. 629 billion by June 2026.
Despite the government’s efforts to reduce the burden on salaried workers through tax rate reductions and the abolition of a 9% surcharge, higher fuel costs continue to impact their finances. The government is fully passing on international oil prices and charging a petroleum levy of Rs. 80 per liter, alongside a climate support levy of Rs. 5 per liter.
The tax disparity comes despite Prime Minister Shehbaz Sharif’s earlier promise to reduce the burden on salaried workers after broadening the tax base.
