Pakistan’s salaried class has become the third-largest contributor to income tax collection in the recently concluded fiscal year (FY24), surpassing even the country’s affluent textile exporters. This comes after a significant increase in income tax revenue from the banking sector, which now holds the top spot.

According to a report by Dawn, The banking sector saw a remarkable 66% rise in income tax contributions, reaching Rs946.08 billion in FY24. This increase reflects the sector’s growing profitability and its significant share of income tax collection, now at 20.88%.

While banks contribute significantly to income tax, their contributions to other taxes like sales tax, federal excise duty, and customs remain relatively low.

The salaried class contributed Rs367.8 billion to income tax in FY24, a 39.42% increase from the previous year. This contribution surpasses that of textile exporters by a significant margin, despite the sector’s export value reaching $16.655 billion in FY24.

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The textile sector’s income tax contribution saw a modest 7.4% increase, reaching Rs111.23 billion. This is attributed to the government’s revised fixed tax regime for exporters and the increased tax rate implemented in the budget.

Petroleum products (POL) remain a major source of federal tax revenue, generating Rs1.195 trillion in FY24. Within this sector, income tax collection rose 6% to Rs413.48 billion.

The power sector has also emerged as a significant revenue generator for the Federal Board of Revenue (FBR). Tax collection from the power sector increased by 38.7% to Rs640.61 billion in FY24. This increase is primarily driven by a surge in sales tax collection, which rose by over 40%.

The high taxation on petroleum products and electricity has placed a heavy burden on the public, leading to increased utility bills and transportation costs. These factors have contributed significantly to the overall inflation rate, which reached 23.41% in FY24.