PTBP Web Desk
Pakistan’s tax collection landscape witnessed a significant shift during the second half of fiscal year 2024-25, as withholding tax from the salaried class recorded an exceptional increase. According to official figures released by the Federal Board of Revenue (FBR), withholding tax collection from salaried individuals surged by 54.7 percent during January–June (2024-25) compared to the same period of the previous fiscal year. This sharp rise underscores the growing contribution of salaried taxpayers to national revenue and reflects the impact of enhanced tax enforcement and revised income tax measures.
The data was shared in the Biannual Review for the second half of FY 2024-25, which the FBR released on Monday after a delay of nearly six months. Despite the delayed release, the figures provide valuable insight into Pakistan’s tax performance and the evolving structure of withholding tax collection across multiple sectors.
According to the FBR’s report, the salaried class contributed Rs214.2 billion in withholding tax under Section 149 of the Income Tax Ordinance, 2001 during the January–June 2024-25 period. This marks one of the highest growth rates among all withholding tax categories and highlights the increasing tax burden on documented wage earners.
Experts believe this extraordinary rise in salaried class withholding tax is linked to multiple factors. These include higher tax rates introduced in recent budgets, limited relief measures for middle-income earners, inflation-driven salary adjustments pushing workers into higher tax brackets, and improved monitoring through payroll documentation. As a result, salaried individuals have become one of the most reliable and compliant sources of direct tax revenue for the government.
In addition to the salaried segment, withholding tax collected from contracts also recorded substantial growth. Under Section 153 of the Income Tax Ordinance, 2001, tax collection from contracts increased by 39 percent during the same six-month period.
This rise indicates higher economic activity in sectors such as construction, services, and government procurement. It also suggests stricter enforcement of tax deductions at source, especially from contractors and service providers dealing with both public and private sector entities. The improved documentation of transactions has helped widen the tax net in this category.
The FBR data further revealed that withholding tax collection from imports, governed by Section 148 of the Income Tax Ordinance, 2001, rose by 10.9 percent during January–June 2024-25. Although the growth rate is lower compared to other categories, it remains significant given the challenges faced by Pakistan’s import sector.
Economic uncertainty, currency depreciation, and import restrictions have affected trade volumes. Despite these constraints, the positive growth reflects adjustments in import values, exchange rate effects, and consistent tax collection mechanisms at ports. Import-related withholding tax continues to play a crucial role in overall revenue generation.
The telecommunications sector also contributed to higher withholding tax revenues. Under Section 235 of the Income Tax Ordinance, 2001, withholding tax collected from telephone users increased by 24.1 percent during the review period.
This growth can be attributed to the widespread use of mobile and data services across Pakistan. With rising digital consumption, increased call and internet usage, and higher service charges, the telecom sector has emerged as a stable and growing source of indirect tax revenue. The expansion of digital payments and online services has further strengthened this trend.
Withholding tax collection from exports, covered under Section 236 of the Income Tax Ordinance, 2001, also showed a healthy increase of 23.5 percent during January–June 2024-25. This growth reflects improved export values and better compliance mechanisms rather than new taxation on exporters.
Government officials maintain that exporters are largely facilitated through refunds and incentives, but withholding tax collection ensures documentation and transparency in export transactions. The increase indicates stronger monitoring and a gradual recovery in export-oriented industries.
The overall increase in withholding tax collection across multiple heads highlights a structural reliance on documented and easily traceable sectors, particularly salaried individuals and registered businesses. While this has helped stabilize revenue flows, economists argue that the tax burden remains unevenly distributed.
There is growing concern that excessive dependence on the salaried class may discourage formal employment and reduce disposable incomes. Analysts stress the need to broaden the tax base by bringing untaxed and under-taxed sectors into the net, including real estate, retail, and segments of the informal economy.
