The Pakistan Business Council (PBC), the country’s largest corporate advocacy platform, has warned that the imposition of budgetary measures proposed for the salaried class would “accelerate brain drain” in Pakistan.
The PBC raised its concerns in a letter dated June 20, 2024, addressing the anomalies arising from the proposed budgetary measures.
As per data provided by the recently released Pakistan Economic Survey 2023-24, highly skilled persons who proceeded abroad for employment increased from 20,865 in 2022 to 45,687 in 2023, a massive increase of 119%.
“Similarly, an increase of 26.6% and 2.28% was also observed in highly qualified and semi-skilled trades during 2023. On the other hand, a rise of 8.7% was witnessed in unskilled categories,” the Economic Survey revealed.
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The PBC said “the 119% increase in the number of Pakistanis emigrating is surely a major cause for concern”.
“Many of these individuals are experienced, high-quality professionals that the formal sector is losing.
“The proposed changes in slab rates, particularly the earlier application of the 35% top rate, will accelerate this brain drain,” PBC warned.
The remarks come after the government increased tax liability for all persons earning more than Rs50,000 a month in Budget 2024-25.
Tax slabs in Finance Bill 2024 reveal that the highest impact would be on anyone earning equal to or more than Rs6 million a year (Rs500,000 a month). The tax liability for these earners increases by Rs22,500.
Interestingly, the tax increase for salaried persons earning as high as Rs12 million a year (Rs1 million a month) is also Rs22,500.
Meanwhile, the PBC said that the formal sector not only loses talent when individuals emigrate but also suffers from their transition to the informal, untaxed sector.
PBC said that the proposal to increase tax revenue from this sector “is unjust”.
“Unlike a government, which can print money and borrow to fund the 20-25% increase in salaries of its employees, the private sector will be adversely affected by a higher brain drain as professionals seek lower-taxed environments in and outside Pakistan,” it said.
The council highlighted that a vast majority of Pakistanis are trying to move abroad due to factors including inflation and tax rates. “Further increasing the tax rate while realizing the fact that salary income is taxed on a gross basis, is an anomaly and needs to be rectified,” it said.
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