Salaried vs Traders in Pakistan: Who Actually Pays the Tax?

The taxpaying salaried class has been quietly protesting for years that its tax collection rises faster than that of businesses. The argument went mainstream this season when a Finance Ministry advisor posted on social media that 'the salaried class paid only five percent of total tax collection while traders paid more.' The post reignited the question every budget season stirs but few numbers survive: who actually carries Pakistan's income tax?

The claim traced back to a July press release from the Prime Minister's Office, which stated that the retail sector paid Rs 617 billion in income tax during fiscal year 2024-25, based on a briefing by the Federal Board of Revenue (FBR). Whatever the intent, the statement did one useful thing: it forced a public debate about who bears the heavier tax burden. That debate is welcome — as our CEO Anees-ur-Rehman Chishti wrote in his November 2025 column 'Unfair tax burden on the salaried class' in lord.pk, such discussions serve as valuable feedback from the people actually paying.

Sections of the media reported a very different pair of numbers: the salaried class paid Rs 545 billion in personal income tax, while retailers paid Rs 62 billion — figures that contradict the government's Rs 617 billion retail claim outright.

On closer examination, the larger number turns out to be a bundle, not a sector's payment. The Rs 617 billion includes Rs 316 billion of advance tax and Rs 216 billion of withholding tax collected from wholesalers, traders, retailers and some corporate entities — amounts collected at source from many different kinds of taxpayers, most of whom are not 'retail' in any meaningful sense. The amount of refundable tax within that collection has not been disclosed, which makes the comparison even less reliable.

Before arguing from any of these figures, it helps to see what each one actually contains:

Pakistan's core tax policy rests on the ability-to-pay principle: those who earn more should contribute more. The principle is universally accepted, and income — while not a perfect measure of ability — is the reasonable proxy every modern tax system uses for it. Comparing the tax contributions of different sectors, as the debate initially did, is unnecessary and misleading; taxation should instead be assessed against each taxpayer's capacity to pay.

Applied honestly, the principle also decides how comparisons should be made. A businessman earning Rs 100,000 should pay roughly the same tax as a salaried individual — or any other taxpayer — earning the same Rs 100,000. Tax contributions should therefore be compared at the same income level: a middle-class employee against a middle-class trader or manufacturer, a wealthy employee against a wealthy trader or manufacturer. Never 'the salaried sector' against 'the retail sector.'

Governments sometimes deliberately reduce rates on specific incomes to support a policy goal — exporters, for instance, are often granted exemptions because they bring foreign exchange into the country. That may be good or bad policy, but it is a separate conversation; it does not change who the tax system's most reliable payers are.

The comparison that circulated set the salaried class against retailers, wholesalers and distributors combined. These groups differ too much in income levels, business scale and compliance behaviour for a combined figure to mean anything. Wholesalers and distributors, in particular, usually run well-established businesses with substantial capital — they cannot reasonably be classified in the same income group as the majority of salaried individuals.

The same objection applies to grouping retailers with exporters. Even taking the most generous reading — exporters and retailers collectively paying Rs 242 billion — that amount is still less than half of what the salaried class contributed on its own.

Population size makes the contrast sharper, not softer. Pakistan has an estimated 2 to 2.5 million retailers and roughly 2.1 million salaried taxpayers — two populations of comparable size whose tax contributions differ by nearly a factor of nine. When the headcounts are this similar, the gap reflects documentation and compliance capacity, not the number of people.

Full-year figures are not the only evidence. Data for the first quarter of the current fiscal year shows that employees contributed Rs 130 billion — an 18% increase over the same quarter last year — even as total national tax collection fell short by around Rs 200 billion.

That combination — salaried contribution rising while the overall pool shrinks — is exactly what has deepened the collective frustration of salary earners. They see themselves shouldering an ever-increasing share of the burden while other sectors continue to enjoy relief at their expense, and the published numbers give that feeling a factual spine.

The distance between Rs 62 billion and Rs 545 billion is not merely numerical — it reflects a growing sense of injustice among Pakistan's most compliant taxpayers. Explanations do not ease that resentment; fairness and equity, ensured in practice rather than in principle, do.

The direction of reform follows from the numbers. The income tax contribution from businesses should be increased gradually, while tax rates for the salaried class should be reduced — shifting the burden on equitable grounds rather than administrative convenience. And the salaried class deserves a seat at the table: salaried individuals should be consulted during budget-making, just as chambers of commerce are heard and given representation.

Tax collection must indeed rise — Pakistan needs the revenue. But not at the expense of the well-being and morale of the salaried class. Their concerns deserve timely and serious attention, because they are the taxpayers who have never had the option to look away.

Policy debates take years; tax seasons do not wait. While the fairness argument is pressed in the press and in budget consultations, there are practical steps every salaried taxpayer can take this season to make sure they pay exactly what they owe — no more, no less: