The Federal Board of Revenue (FBR) has started issuing notices to teachers and researchers, demanding the payment of 100% income tax. This development comes as the government simultaneously seeks approval from the International Monetary Fund (IMF) to grant a 25% tax relief to the affected professionals.
FBR’s Tax Collection Drive and Revenue Shortfall
The FBR has intensified efforts to increase tax revenue due to a substantial shortfall of Rs470 billion in the first seven months of the current fiscal year. In January alone, the FBR failed to meet its target by Rs86 billion, prompting authorities to expand their focus on tax collection from teachers and researchers.
Withdrawal of 25% Tax Relief for Teachers and Researchers
Previously, the government had offered a 25% income tax exemption to this sector. However, the Finance Act 2022, implemented in July 2022, revoked this benefit. Despite this, it took the FBR nearly two years to recognize the change, leading to the sudden issuance of tax notices in 2024.
FBR’s Tax Notices to Educational Institutions
On January 14, 2024, the FBR formally notified NUST (National University of Sciences and Technology) about the withdrawal of the tax exemption. The notice directed the institution to deduct and remit full tax amounts from salaries of teachers and researchers, effective July 2022.
Failure to comply will lead to penalties under Section 161 of the Income Tax Ordinance. This action could affect numerous educational institutions across the country, placing a significant financial burden on academicians.
Impact on Teachers and Researchers
The enforcement of this 100% income tax has sparked concerns among educators and researchers. Many argue that this policy will negatively impact higher education institutions, leading to:
- Increased financial stress on faculty members
- Reduced incentives for research and development
- Brain drain, as professionals seek opportunities in tax-friendlier regions
Government’s Efforts to Reintroduce 25% Tax Relief
While enforcing the 100% tax rate, the government is also engaging with the IMF to reintroduce a 25% tax relief for teachers and researchers. However, given the ongoing fiscal crisis, securing this concession remains uncertain.
Legal Ramifications for Non-Compliance
Educational institutions failing to comply with the FBR’s directives will face:
- Hefty penalties under Section 161
- Possible legal proceedings for non-payment
- Financial audits and scrutiny from tax authorities
To avoid these consequences, universities and colleges must ensure compliance with the new tax regulations.
The FBR’s decision to collect 100% income tax from teachers and researchers has sparked widespread debate. While the move aims to bridge the revenue shortfall, it raises concerns regarding its impact on education and research in Pakistan.
As discussions continue between the government and the IMF, it remains to be seen whether tax relief will be reinstated or whether educators will have to bear the full tax burden.
