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Salaried people drawing salary upto Rs200,000 per annum should be totally exempted from taxation

Mar 13 - 26, 2000

The salaried class badly hit from all directions is the only segment of the tax payers which always contributes to the exchequer at the optimum level.

Since the income tax is deducted at source the salaried class has no option but to comply not only to the direct taxation system but to bear the burden of indirect taxes at par with the affluent class in the society.

Since there is no way to scape under the system, the salaried class in the current depressed economic situation, the rising inflation, increase in utilities and other expenses because of rising indirect taxes specially on POL products having a multiplier effect on general prices, the salaried class is confronted with tremendous hardships in Pakistan.

Zammurrad Hussain Jaffery, president of All Pakistan Tax Bar Association, one of the most senior income tax practitioners while talking to PAGE said that under the present system the poor are getting poorer and the rapid increase in number of the poor is increasing by the salaried class especially getting below Rs200,000 because this segment is unable to meet the two ends under the existing taxation system.

He strongly suggested that salaried people drawing salary upto Rs200,000 per annum should be totally exempted from taxation in order to give them relief aimed at creating a will to work devotedly and love for the country.

It is unfortunate that the middle class which is considered as the backbone of any economy is depleting fast and the trend is moving fast towards a situation where only two classes i.e. the rich and the poor will be the main constituents of the society. This sounds a note of warning for our economic planners to save the economy from a disaster.

Jaffery referred to the poverty alleviation programme launched by the present government led by Gen. Pervez Musharraf and suggested that in order to support this programme effectively, the low paid salaried class up to Rs200,000 should be totally exempted from payment of direct income tax as this class is already heavily taxed through indirect taxation system.

Zafar Aziz Osmani, Senior Executive Vice President of Pakistan-Kuwait Investment Company who is also an expert on taxation and Human Resource while commenting on the taxation system in Pakistan said that the change in the taxation system in the assessment year 2000-2001 has proved as a sudden blow to the salaried class in Pakistan. He said that from next assessment year, the entire income (except utility and medical expenses) is taxable as soon as the total income exceeds Rs300,000 per annum which comes to Rs25,000 per month. Due to this change, employees over the income of Rs300,000 suddenly gets an exposure of almost double of the tax charge. Consequently this blow is causing tremendous hardship to the salaried class mainly because of rising inflation, higher tax which nullifying the effect of salary increases and due to increase in utilities and other expenses plus rising indirect taxes in Pakistan.

Indirect taxes

Zafar Osmani said that increasing cost of living is becoming intolerable specially for the salaried class due to GST imposition on most consumer goods, enhancement of Sales Tax from 12.5 per cent to 15 per cent and an additional 3 per cent on non-registered persons. Other factors which are making the life miserable for the people living on fixed income include increase in petrol prices by approximately 25-30 per cent from Rs.18.5 litre to the present Rs29 level, electricity rates at the rate of 55 per cent per annum, telephone rates by 16 per cent per annum, gas charges by 9 per cent per annum, excise duty on cheques from Rs1 per cheque to Rs5 per cheque and duty levied on credit card spending at 1.6 per cent.


The increase in Income Tax along with the expanding net of all other indirect taxes altogether have depleted a significant income portion of the salaried class.

The salaried class which has limited ability to curtail its already committed application of the income source on living expenses, children education and a set standard of living.

Generally speaking, the person belonged to salaried class is traditionally responsible to feed to the entire family some times consisting on parents, sisters and of course wife and children. One find it difficult to come upto the expectations of everyone belonged to him and in case the man badly hit from all directions succumbs to undesirable means of income like bribery etc to meet the financial pressures facing at home.

Another negative point of the present salary taxation structure is that it is not conducive for retaining and attracting the high quality of professionals needed in Pakistan.

Hence the rationalizing the salary taxation structure in Pakistan is critical to alleviate the extreme hardships the salaried class is undergoing, therefore relief is justified for reduction in the incident of indirect taxes for the salaried class.

It is suggested that in the forthcoming budget for 2000-2001 income tax rates with a maximum slab at 20 per cent be restored and an earned income relief of at least 10 per cent of the taxable income to partially compensate for the continuous expansion in the indirect taxes.