LAHORE: Chairman Federal Board of Revenue (FBR) Rashid Langrial has acknowledged that Pakistan’s tax burden on the salaried class is higher than that of many regional countries, with income tax rates reaching as high as 35 percent for annual salaries exceeding Rs 4.1 million.
Speaking at ThinkFest in Lahore, he said that while a person earning Rs 10 million annually pays around 27 percent in tax, the core issue is not just high rates but low tax compliance.
He highlighted that out of approximately 150,000 doctors, only 55,000 file tax returns, and the majority of those declare annual incomes below Rs 2 million, paying minimal tax. In contrast, salaried individuals have no way to conceal their income and therefore bear a disproportionate tax burden.
READ MORE: FY25 annual report: FBR admits excessive tax burden on salary earners
The chairman said: “Even when tax rates were lower in the past, compliance among professionals such as doctors remained weak. Over the past 15 years — particularly in the last two to three years — tax rates have steadily increased.”
He said out of Pakistan’s 42 million households, about 7 percent own air conditioners. “According to me at least 3.2 million of these households should be part of the tax net,” he stated.
Highlighting FBR performance he said that by the end of the June 2025 tax year, 4.9 million returns were filed, rising to 5.9 million this year — an addition of one million new filers. However, around 300,000 of these claimed they were not taxable. The tax-to-GDP ratio improved from 8.83 percent last year to 10.33 percent this year.
He emphasized that improving compliance and properly documenting inter-provincial economic activity are essential to broadening the tax base. About the existence of multiple tax regimes, he said that these were shaped by trader lobbies who prioritized policy influence in Islamabad over productivity at their factories.
Langrial warned that without an increase in exports, economic growth would stall. While the government has made local production more profitable and is working to reduce energy tariffs, he noted that industry itself has rarely demanded tariff reductions.
On sales tax, he pointed out that while India collects up to 6 percent sales tax on goods, Pakistan collects only about 3.5 percent, despite having a similar structure. He revealed that the income tax gap for around 670,000 individuals amounts to Rs 1.2 trillion.
He also highlighted widespread misreporting, stating that over 182,000 individuals purchased property without filing tax returns. Tax evasion under the Export Facilitation Scheme persisted in the sugar and textile sectors, prompting FBR to introduce monitoring systems in sugar mills, which generated an additional Rs 1.6 billion in revenue within a year.
Addressing resistance from industry groups such as APTMA over installing monitoring cameras, Langrial said implementation would proceed regardless. He stressed that while many advocate fixing the system, few are willing to correct their own practices. He also revealed that Rs 472 billion in tax revenue remains unclaimed by individuals who pay taxes but do not formally report them.
On institutional reforms, he said that FBR has adopted a zero-tolerance policy on corruption, with immediate dismissal for officers seeking political recommendations for transfers and postings. He reiterated that while tax rates should be lowered, this should not be done by unfairly burdening one group while granting exemptions to others.
Former finance minister Miftah Ismail echoed these concerns, citing the sugar industry as a clear example of elite capture. He said influential groups benefited from sugar exports while ordinary Pakistanis paid higher prices domestically. He concluded that meaningful reform requires not just rhetoric, but responsible citizenship.
Copyright Business Recorder, 2026
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