KARACHI: Since the announcement of the federal budget for 2013-14, the salaried class finds itself in a state of shock — and for understandable reasons.

There are about 1.6 million salaried people who pay income tax — an abysmal figure in any case for a country with a population of over 180 million — and an overwhelming majority of them are going to take a direct hit as a result of the measures proposed (as opposed to the 3,500 salaried people claimed by the government).

If this were not bad enough, many view with suspicion the substantial decrease of the tax burden on those who fall in the middle of the tax slabs, which benefits, for example, top civil servants and other senior government functionaries. Have those who work out the details in the corridors of power found a way to give relief to themselves, some wonder.

Even beyond salaried persons, the general feeling is that the new taxation measures punish honest taxpayers by increasing the burden on them, reward tax evaders by not broadening the tax net and let free-loaders get away with not sharing the responsibility of sustaining the system.

In his budget speech last week, Finance Minister Ishaq Dar proposed the revision of income tax rates for salaried individuals and an increase in the existing tax slabs from six to 12 in the Finance Bill 2013. The exemption limit was, however, raised from Rs350,000 per annum to Rs400,000.

The envisaged measures will alter the current balance of tax incidence on different categories of salaried earners. The announcement implied that the Federal Board of Revenue (FBR) would be entrusted with more powers, including access to information on private bank-account holders.

“The proposed taxation measures perpetuate the regressive character of the taxation regime in Pakistan,” a senior executive commented in private. “The FBR, an institution known to be infested with inefficiency and corruption, has been entrusted with more powers that we fear will be abused to harass lawful citizens operating in the formal economy.”

Information gathered by Dawn indicates that in many cities, members of the executive class are pooling their resources and interacting with lawyers and accounting firms to carve out a collective response to what they consider a blatant violation of their right to be treated equitably with respect to sharing the tax burden.

“Instead of increasing the tax base, the Finance Bill has further increased the burden on the captive salaried taxpayers who contribute 11.3 per cent of the total withholding tax collected against 8.4pc on bank interest, 5.7pc on exports and 4.6pc on dividends,” said a senior executive of a private bank in a comment emailed to Dawn.

The tax liabilities of salaried persons are deducted at source. “We can neither hide our actual earnings as do businessmen, traders, landlords or professionals working privately, nor — like them — can we shift the impact of burden to others by increasing the prices of goods or services,” said an accountant who works for a law firm.

“Can someone explain how the fabulous earnings of the landed aristocracy, builders, businessmen, brokers, property tycoons and money-minting retailers are worth any less than the fixed pay-cheque I receive at the end of the month?” fumed a young professional who works for a multinational.

The small team of lawyers and accountants were consulted in an extensive exercise to assess the incidence of income tax under the new scheme and monitor the direction of the variations.

The findings are reproduced in the accompanying chart.

The exercise exposed several anomalies in the proposed tax regime. If implemented, the new taxation regime will hurt people earning Rs60,000 per month the most — even more than those who draw their monthly salaries in millions. The incidence of tax on a junior level employee earning Rs60,000 a month will be 34pc more than before, against 30pc on those earning Rs1.2 million and above.

For people earning between Rs175,000 and Rs400,000, the tax liability has actually fallen. Most senior bureaucrats, judges and generals fall in this band, leaving some wondering about accidents and others about creative thinking.

Meanwhile, about a million income tax payers, mostly from lower- and upper-most salaried class, will shoulder the brunt of the proposed measures.

Reports have been circulating for the past two years that the government has the details of three million tax-dodgers. Why the resource-starved government did not bring them into the net or force them to clear their liabilities was not clarified by the new economic team.

“We are watching closely the Supreme Court’s stance on sales tax to decide our future course of action,” a civil society activist coordinating between different groups of disenchanted salaried taxpayers told Dawn from Lahore.

“We are hoping to open a dialogue with the government’s economic team to rationalise the tax regime,” a senior analyst said. “In its current form, it violates not just the PML-N manifesto but also the Constitution of Pakistan that makes discrimination impermissible.”