One million workers face higher tax rates due to frozen thresholds

The recent analysis highlights significant tax burden disparities among different income groups, with salaried individuals in Pakistan contributing far more in taxes compared to unregistered retailers and exporters. In the first eight months of the fiscal year, salaried workers paid Rs331 billion in income tax, contrasting sharply with the mere Rs23 billion from retailers. This situation reflects ongoing macroeconomic challenges, exacerbated by the government's reliance on salaried workers as a primary revenue source without securing relief measures from the IMF. In the UK, over a million individuals have been pushed into the highest tax bracket due to frozen income thresholds, increasing from 587,000 to an estimated 1,130,000 since April 2023, as inflation outpaces wage growth. Experts note that the freezing of the additional rate threshold, initially set at £150,000 in 2010 and now reduced to £125,140, has led to many taxpayers losing personal allowances and facing higher taxes on savings. This trend, termed fiscal drag, affects not only working-age individuals but also pensioners, with projections of over 100,000 pensioners entering the 45% tax bracket by April.