ISLAMABAD: The Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the government to provide significant tax relief to salaried individuals in the upcoming Budget 2025-26, citing growing concerns over the rising burden on one of Pakistan’s most compliant taxpayer segments.
In its detailed tax proposals, OICCI highlighted the escalating tax collection from salaried individuals under Section 149 of the Income Tax Ordinance, 2001, noting a sharp increase over the past three years. Tax contributions rose from Rs264 billion in 2022-23 to Rs368 billion in 2023-24, and further surged to Rs570 billion in 2024-25 — a nearly 40% annual rise.
The Chamber criticized the removal of tax credits for investments in mutual funds, home loans, and insurance premiums, stating this has further intensified the financial burden on salary earners. OICCI emphasized that since salaried individuals have taxes deducted at source, they remain among the most compliant taxpayers. However, placing the tax burden of other sectors disproportionately on them is unjust.
Unlike businesses, salaried individuals are taxed on gross income, without deductions for essential expenses such as housing, education, or healthcare. This results in a higher effective tax burden than what most corporates and exporters face. The Chamber also warned of a growing brain drain, as pressure on the salaried middle and upper-middle class has led to around 800,000 skilled professionals leaving Pakistan annually.
OICCI stressed that Pakistan currently has one of the highest effective salary tax rates in the region, with no rebates or deductions available to individual taxpayers — a situation not mirrored in comparable developing countries.
Key Recommendations by OICCI:
• Increase taxable income threshold to Rs1.2 million to adjust for inflation.
• Abolish the 10% ‘surcharge’, which acts as a punitive tax on high earners.
• Reinstate tax credits for mutual fund investments, home loans, and insurance premiums.
• Allow deductions for education and medical expenses.
• Restore house loan interest deductibility to ease financial pressure.
Rationale:
These changes aim to relieve the overburdened salaried class, boost disposable income, and encourage savings and investment. OICCI warned that the current tax policy — which includes higher rates, reduced slabs, and the 10% surcharge — contradicts the principles of progressive taxation and is damaging long-term economic stability.
The OICCI concluded that realigning salary tax structures is essential to ensure fairness, retain talent, and revive middle-class financial resilience.
