Centuries ago, the great Muslim scholar Ibne Khaldun, in his masterpiece, “The Mu-qaddimah”, argued that excessive taxation often precipitated the decline of empires, reducing revenues despite higher rates.

In the 1930s, John Maynard Keynes echoed a similar sentiment, that lowering tax rates could enhance government revenues by stimulating economic activity. These timeless insights resonate profoundly in Paki-stan’s current fiscal landscape, where the salaried class and compliant businesses are being disproportionately taxed, while vast segments of the economy remain un-der-taxed. Recently, Pakistan has witnessed an exorbitant increase in income tax rates im-posed on salaried individuals. According to the Federal Board of Revenue (FBR), withholding tax collection from the salaried class surged by 55% in FY2024–25, ris-ing to PKR 605 billion compared to PKR 391.4 billion a year earlier. Salaries now ac-count for 18% of direct taxes, making them the second-largest contributor. This sharp rise is not merely the result of improved compliance but stems from reduced income tax slabs, higher rates and stricter reporting requirements.

Mid-management and technical professionals, find themselves bearing the brunt of this fiscal strategy. The taxation measures have not only strained household budgets but also undermined Pakistan’s ability to retain talent critical for innovation and pro-ductivity. Businesses, too, are struggling under heavy taxation. With profits taxed at rates exceeding 50% once levies and indirect costs are factored in, investment en-thusiasm has waned. The convoluted withholding tax regime further........

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