I know there is sales tax added to certain items (prepackaged food, electronics, appliances, etc), but as far as income tax is concerned, isn’t it pretty much income tax free for the poor to the middle class?
This is just from observation, I haven’t read over the whole Pakistani tax code.
I actually found out on GS that there is a tax return in Pakistan too, but never found out how it works.
Re: Isn't Pakistan pretty much an income tax free country for lower to middle class?
Well this is not the case. Sales tax is now applicable on almost all consumer goods here. Every manufactured commoditiy's price consists of sales tax at 15%. So if you buy a soap for Rs. 15.00, that means Rs. 2 will go the government and Rs. 13 to the seller. Sales tax is one main contributor of government reveneus.
Middle class if they are salaried persons - they get salaries after deduction of income tax at source. Nobody can escape that! Even the midde class shopowners have to pay some income tax to the government in cities like Karachi, Lahore, Islamabad etc.
Re: Isn't Pakistan pretty much an income tax free country for lower to middle class?
Well this is not the case. Sales tax is now applicable on almost all consumer goods here. Every manufactured commoditiy's price consists of sales tax at 15%. So if you buy a soap for Rs. 15.00, that means Rs. 2 will go the government and Rs. 12 to the seller. Sales tax is one main contributor of government reveneus.
Middle class if they are salaried persons - they get salaries after deduction of income tax at source. Nobody can escape that! Even the midde class shopowners have to pay some income tax to the government in cities like Karachi, Lahore, Islamabad etc.
How does this tax deduction work for salaried people? I thought tax only applied to people who earned 40,000 RS and above? So at the end of the year, do people file a tax return if they think they over paid?
Re: Isn't Pakistan pretty much an income tax free country for lower to middle class?
The tax free income for salaried people is now Rs. 150,000/= 40,000/= was some 14 years ago. It is the responsibility of the employers to deduct tax from the salaires of their employees and deposit it into the government treasuary.
In most cases there is no over deduction (over payment). If there is any, that can be adjusted in next years payments. Now the salaried class does not need to file a return if they do not have anyother source of income other than salary. The employer simply submits a tax statement on their behalf.
The Musharraf government has made various reforms with the use IT, so that more and more people are paying taxes in Pakistan.