KARACHI: An unthinkable change is taking place at the furnished corporate offices in Karachi. The elegantly-attired educated people who work there are talking about mobilising to stage a street protest against the increase in taxes on their income.
CEOs, vice presidents, directors and managers everyone feels there is a need to send a clear message to the government that it can no longer target just the salaried class whenever there is a need to raise additional revenue.
In the latest budget, the government imposed a 30 per cent IDP (Internally Displaced Person) tax on annual bonuses and another 5pc on the tax payable on salaries of corporate employees.
“The government did not pay for my education or my medical expenses and then subsidy has been withdrawn from electricity tariff,” cried Sabeen Hasan, a manager at a foreign bank. “Now it expects me to pay for rehabilitation of those displaced by war?”
Insecurity, incessant power breakdowns, long congestions on roads, little entertainment and job losses have made these people all the more skeptical about government’s intentions. They have started emailing each other their grievances and now they want to protest.
Sentiments are flaring as they see that like always big landlords, speculative traders and hundreds of thousands of sole proprietorships have been left untouched by the authorities.
Afrasiab Ahsan, an accountant, is of the opinion that corporate employees are the easiest target when it comes to raising taxes. “Tax from our income is deducted by the employer at source and everything is documented, so there is no question of avoiding it.”
But, he remarks, this also speaks volumes about the weak position of the government, which has no confidence in itself to bring more areas in the tax net.
Even in the management hierarchy, the mid-tier managers who do the coordination work between the workers and senior executives would be the worst affected, explains Raza Hemani, a senior auditor in an energy firm.
“The impact of IDP tax is regressive,” he said, explaining that those who earn between Rs75,000 and Rs83,000 a month will be paying more as compared to senior executives who draw Rs720,000 and over.
A tax on bonus, which is a performance reward for an employee, will affect the quality of output in major corporations, which thrive on worker productivity, experts say.
Farooq Hassan, Executive Director Management Association of Pakistan (MAP), says people seek reward for working over and above their assigned tasks. “Naturally, this tax will discourage them.”
He says bonuses are an annual feature which normally vary between two and five times of the monthly salary, depending on the organisation and the individual’s performance.
Interestingly the tax authorities, which have been bragging on bringing reforms to increase revenues, have no explanation for the IDP tax.
“It is only for one year,” casually answered Mehmood Alam, Member Facilitation Federal Board of Revenue (FBR) before he abruptly disconnected the phone call. He did not say why agriculturists have been kept out of the tax net.
People are also questioning the government’s half-hearted approach to cut its day-to-day expenses as the country continues to suffer from economic slowdown and deteriorating security situation.
Moin Mohajir, a finance director at a pharmaceutical company, wonders why the Prime Minister and the President have not announced any drastic step to cut their expenses up till now. “Our leaders should set an example for the people to follow,” he said.
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