By WEB DESK: Pakistan Business Council warns of accelerated brain drain due to proposed budgetary measures.
The country’s leading corporate advocacy group, the PBC has issued a stern warning regarding the potential impact of proposed budgetary measures on the salaried class, suggesting these could significantly “accelerate brain drain” in Pakistan.
In a letter on June 20, 2024, the PBC highlighted anomalies in the proposed budgetary measures, raising concerns about their detrimental effects.
According to the Pakistan Economic Survey 2023-24, the number of highly skilled professionals leaving Pakistan for employment abroad surged from 20,865 in 2022 to 45,687 in 2023, marking a staggering 119% increase.
Additionally, the survey noted a 26.6% rise in highly qualified trades, a 2.28% increase in semi-skilled trades, and an 8.7% rise in unskilled categories in 2023.
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Budget 2024-25 and Tax Implications
The PBC has voiced its concerns, stating, “The 119% increase in the number of Pakistanis emigrating is surely a major cause for concern.” They emphasized that many of these emigrants are experienced, high-quality professionals, crucial to the formal sector.
The proposed changes in tax slab rates, particularly the earlier application of the 35% top rate, are expected to accelerate this brain drain, according to the PBC.
In Budget 2024-25, the government increased the tax liability for individuals earning over Rs50,000 a month. The new tax slabs in the Finance Bill 2024 show the highest impact on those earning Rs6 million or more annually (Rs500,000 monthly), with a tax increase of Rs22,500.
Interestingly, the tax increase for salaried individuals earning up to Rs12 million a year (Rs1 million monthly) is also Rs22,500.
Impact on the Formal Sector
The PBC pointed out that the formal sector not only loses talent when individuals emigrate but also suffers when they transition to the informal, untaxed sector. The council described the proposal to increase tax revenue from this sector as “unjust.”
Unlike the government, which can print money and borrow to fund salary increases of 20-25% for its employees, the private sector will be severely impacted by a higher brain drain as professionals seek lower-taxed environments in and outside Pakistan.
The PBC highlighted that many Pakistanis are seeking to move abroad due to factors like inflation and high tax rates. They stressed that further increasing the tax rate on gross salary income is an anomaly that needs rectification.
