Increased Taxes on Salaried Class May Lead to Brain Drain in Pakistan
The Pakistan Business Council (PBC) has expressed serious concern over a 119% increase in the number of experienced and highly skilled Pakistanis emigrating from the country.
“The 119% rise in emigration among Pakistanis is alarming. Many of these individuals are seasoned professionals of high caliber whom the formal sector cannot afford to lose. The proposed changes in tax slab rates, especially the early application of the 35% top rate, will exacerbate this brain drain,” the PBC stated in a tweet on [specific date].
The PBC noted that when professionals emigrate, the formal sector not only loses talent but also suffers from their transition into the informal economy, where taxes are not paid. Salaried employees shoulder numerous costs that the state is supposed to cover but often fails to do so.
Furthermore, the PBC argued, “The proposal to increase tax revenues from this sector is unfair. Unlike the government, which can print money or borrow to fund salary increases of 20-25% for its employees, the private sector will be adversely affected by increased brain drain as professionals seek lower-tax environments within and outside Pakistan.”
In the recent budget for 2024-25, the federal government proposed income tax rates of up to 35% for the salaried class. Below are the detailed income tax slabs:
Sr # | Taxable Income | Rate of Tax |
1. | Where taxable income does not exceed Rs. 600,000 | 0% |
2. | Where taxable income exceeds Rs. 600,000 But does not exceed Rs. 1,200,000 | 5% of the amount Exceeding Rs. 600,000 |
3. | Where taxable income exceeds Rs. 1,200,000 But does not exceed Rs. 2,200,000 | Rs. 30,000 + 15% of the amount exceeding Rs. 1,200,000 |
4. | Where taxable income exceeds Rs. 2,200,000 But does not exceed Rs. 3,200,000 | Rs. 180,000 + 25% of the amount exceeding Rs. 2,200,000 |
5. | Where taxable income exceeds Rs. 3,200,000 But does not exceed Rs. 4,100,000 | Rs. 430,000 + 30% of the amount exceeding Rs. 3,200,000 |
6. | Where taxable income exceeds Rs. 4,100,000 | Rs. 700,000 + 35% of the amount exceeding Rs. 4,100,000 |
