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Taxing The Talent: Is Pakistan Pushing Skilled Professionals Away?


Brain drain refers to the migration of skilled professionals from one country to another (especially in a developed country) for better salaries, incentives and working conditions. Pakistan has been grappling with the disease of brain-drain for decades and tax on salaried professionals is one of the main contributing factors.

How does Tax on Skilled Professionals Lead to Brain-Drain?

  • Reduced Disposable Income: Higher taxes on salary leaves salaried workers with less money to spend. So, when they see a better opportunity abroad that leaves them and their family with more money after taxation, why would they reject it?

  • Discouragement of Talent: Imposing higher taxes on skilled professionals, signals that the government does not care about them. It leaves them with resentment and a lack of motivation to stay in a country where their talent lacks respect and value.


The situation in Pakistan:


Below is the table showing the tax rates hike in this (2024 - 2025) budget compared to last year’s (2023 - 2024) budget. 


TAX SLABS FOR SALARIED INDIVIDUALS 

2024 - 2025

2023 - 2024

Income Per Year 

Tax Rate

Income Per Year

Tax Rate

Below Rs. 600,000

Zero per cent

Below Rs. 600,000

Zero per cent

Rs. 600,000 to Rs. 1.2 million

5% of the amount exceeding Rs. 600,000

Rs. 600,000 to Rs. 1.2 million

2.5% of the amount exceeding Rs. 600,000

Rs. 1.2 million to Rs. 2.2 million

Rs. 30,000 + 15% of the amount exceeding Rs. 1.2 million

Rs. 1.2 million to Rs. 2.4 million

Rs. 15,000 + 12.5% of the amount exceeding Rs. 1.2 million

Rs. 2.2 million to Rs. 3.2 million

Rs. 180,000 + 25% of the amount exceeding Rs. 2.2 million

Rs. 2.4 million to Rs. 3.6 million

Rs. 165,000 + 22.5% of the amount exceeding Rs. 2.4 million

Rs. 3.2 million to Rs. 4.1 million

Rs. 430,000 + 30% of the amount exceeding Rs. 3.2 million

Rs. 3.6 million to Rs  6 million

Rs. 435,000 + 27.5% of the amount exceeding Rs. 3.6 million

Above Rs. 4.1 million

Rs. 700,000 + 35% of the amount exceeding Rs. 4.1 million

Above Rs. 6 million

Rs. 1,095,000 + 35% of the amount exceeding Rs. 6 million


Pakistan Business Council (PBC) has expressed serious concerns about the potential negative

impacts of the proposed tax hikes on salaried workers in Budget 2024. The council concluded that a significant number of Pakistanis are contemplating emigration due to factors such as high inflation and high tax rates.

According to the Pakistan Economic Survey 2023-2024, there was a 119% increase in the number of highly skilled professionals leaving Pakistan for employment abroad. 


Other Factors for Brain Drain:


While higher tax rates are one of the leading factors for the brain drain in Pakistan, it is not the only factor.


  • Socio-Economic Factors: Political instability, Security concerns, lower quality of life and working conditions also work as fuel to ignite motivation to leave Pakistan and migrate to a better country.

  • Limited Career Opportunities: The lack of growth incentives from the government of Pakistan for skilled professionals can push them to seek opportunities abroad for their careers.


What Should the Government Do?


  • Targeted Tax Incentives: Offering tax incentives to skilled professionals in the high-demand field can be a very first step in making them stay in Pakistan.

  • Career Development: Focusing on improvement in career development and investing in highly skilled professionals by organizing training programs, will help in creating a more desirable working environment.

  • Improved Living Standards: By addressing socio-economic factors, like security, infrastructure, and economic policies will help the government in making Pakistan a better place for professionals to work and live.



Source:

https://profit.pakistantoday.com.pk/2024/06/20/pbc-warns-tax-hikes-could-worsen-pakistans-brain-drain-crisis/

https://dailytimes.com.pk/1202311/increased-taxes-on-salaried-group-to-accelerate-brain-drain-pbc/#google_vignette

https://www.dawn.com/news/1839582

https://www.brecorder.com/news/40249883

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