ISLAMABAD: Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed a significant increase in the taxable salary income threshold to Rs1.2 million annually in the upcoming federal budget 2026-27, compared to the existing exemption limit of Rs600,000.
The chamber has urged the government to provide meaningful relief to Pakistan’s salaried class, describing them as one of the most transpartent and compliant taxpayer segments in the country due to direct withholding of income tax at source.
According to the OICCI, salaried individuals continue to face a disproportionately high tax burden amid rising inflation, increasing utility costs, and declining purchasing power, despite already being fully documented in the tax system.
Citing data from the Federal Board of Revenue, the chamber noted that salaried individuals contributed Rs365 billion in income tax during July–February of FY2025-26, surpassing the combined tax contributions of retailers, wholesalers, exporters, and property-related sectors during the same period.
The OICCI estimated that the effective tax incidence on salaried income has reached as high as 38.5%, significantly reducing disposable incomes and weakening household consumption. It warned that excessive taxation on formal employment could discourage documentation and negatively impact overall economic activity.
For the federal budget 2026-27, the chamber has proposed several key reforms, including raising the taxable salary threshold to Rs1.2 million, maintaining the tax return filing requirement from Rs600,000 income level, reducing the top salary tax slab to 25%, and abolishing the 10% surcharge on salaried income. It argued that the surcharge places an additional burden on already heavily taxed compliant taxpayers.
The OICCI further highlighted that Pakistan’s salary tax rates are comparable to those in some advanced economies, despite significantly lower public service delivery and social protection systems, pointing to an imbalance in the current tax structure.
The chamber stressed that sustainable revenue growth should be achieved by expanding the tax base rather than increasing pressure on already documented sectors. It also called for bringing under-taxed segments of the economy into the formal net to ensure fairness and long-term fiscal stability.
According to the OICCI, a more predictable, transparent, and equitable tax system would improve compliance, strengthen economic stability, and support sustainable growth. The federal government is currently finalizing budget proposals for 2026-27 amid ongoing consultations with stakeholders.
