KARACHI: With citizens already braving high food prices, massive power bills, and expensive fuel, a World Bank concern that the income tax exemption threshold for salaried individuals is “suboptimally high” has rubbed salt into many already festering wounds.

In Pakistan, salaried people earning Rs50,000 or below per month are currently exempt from any tax. So, if the government goes on to follow the World Bank’s recommendation, many more citizens already struggling to make ends meet will find it even more difficult to survive in a challenging economic environment.

Several industrialists, employers, and trade union body representatives who spoke to Dawn said the proposal to tax lower incomes would be disastrous for people working in the private, corporate, and industrial sectors.

The World Bank’s recommendation would be “an economic genocide for the people earning Rs50,000 per month”, Nasir Mahmood, secretary of the National Trade Union Federation (NTUF), told Dawn, stressing that the amount was barely equal to $175.

“No government in the world imposes tax on people earning $175 per month. Is the World Bank unaware of the indirect taxes that consumers are already paying on various products?” he wondered.

Stakeholders insist implementing World Bank’s proposal will hurt people amid high inflation

He claimed that 95pc employees in the private sector and industries were already not getting the minimum wage set by the government. Similarly, most workers were not registered with social security and pension schemes.

Riazuddin, a former chairman of the SITE Association of Industry (SAI), said the World Bank’s proposal to tax people drawing meagre salaries contradicted the IMF chief’s stance who earlier advised Caretaker Prime Minister Anwaarul Haq Kakar to tax the wealth and protect people with low incomes.

Of all the unskilled, semi-skilled, and skilled employees working in the SITE industrial areas, 90pc were getting salaries between Rs27,000 and 50,000 per month.

“How can a husband and wife with four children take on an extra tax burden when they are already spending Rs20,000 per month for putting food on the table besides paying heavy power bills and school fees?” he asked.

Ismail Suttur, president of the Lasbela Chamber of Commerce and Industry (LCCI) and a former chairman of the Employers Federation of Pakistan (EFP), described the World Bank’s proposal as “insane advice”, insisting that it didn’t consider the negative impact such a measure could have on citizens already paying indirect taxes on many items.

Taxing the income equivalent to less than $175 did not exist anywhere else in the world, he stressed, urging the government to refrain from implementing the proposal.

Mr Suttur said most skilled workers in the industries were drawing monthly salaries between Rs50,000 and Rs100,000.

Faisal Moiz Khan, president of the North Karachi Association of Trade and Industry (NKATI), noted that even those earning Rs100,000 a month were struggling in the face of rising cost of living. He said that 30-40pc of the skilled workers were getting Rs50,000 or higher monthly salary in the North Karachi industrial area.

Topline Securities CEO Mohammed Sohail said all multilateral agencies protected poor segments of society.

People getting less than Rs50,000 per month were already in trouble due to high inflation, he said, adding that the proposal should be to tax the rich more.

A Federal Board of Revenue official, who asked not to be named, said that if the proposal was implemented, the business people would deduct the tax at source from employees’ salaries and submit it to the national kitty, which would be an easy task.

However, taxing the undocumented sector, which he said was far bigger than the documented one, would still remain an uphill task.

Published in Dawn, October 6th, 2023

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