Budget may include income tax relief amid salary, pension freeze

ISLAMABAD: The government is considering reducing the income tax burden on salaried individuals while refraining from increasing salaries and pensions in the upcoming budget, aiming to provide equitable fiscal relief to both public and private sector employees. Informed sources told Dawn that Finance Minister Muhammad Aurangzeb has expressed a desire to lower tax rates and, if possible, raise the taxable income threshold for the salaried class in recognition of their significant contribution to revenue generation compared to retailers, wholesalers, exporters, and real estate players. On the other hand, the government may keep salaries and pensions uncha­nged at current levels, using the resulting fiscal savings to provide tax relief instead. “There is no reason to increase salaries if it pushes employees into hig­her taxable income brackets, leaving government employees with little to no increase in take-home pay,” an official said. He added that with lower tax rates and higher taxable income thresholds, government employees would remain net beneficiaries even without a salary increase. “Gov­ernment employees would not be worse off financially. That is neither the idea nor the intention,” he said. Government salaries have increased by more than 60 per cent over the past four years, while private sector wages have generally stagnated amid high inflation and lower economic growth. The official said the tax policy office and some independent consultancy firms were working on various proposals to be discussed with the IMF mission during budget consultations beginning on May 15. During this fiscal year, salaried class paid more than double the real estate taxes; even higher than the combined revenue from wholesalers, retailers and exporters In addition, the development programme may be reduced further to a skeleton allocation, although final decisions on income tax, salaries, and development spending will become clearer during discussions with the IMF. Last year, the fed