Karachi, Lahore, Islamabad, taxes, tax payment, FBR

Two Karachi markets pay more tax than all markets of Lahore, Islamabad

Karachi has always been in a debate for being marginalized despite paying heavy taxes making it a top tax-paying city across the country.

According to FBR report, Karachi paid more than Rs98 billion in income tax by its markets for fiscal year 2017-18. This figure does not include any sales tax, corporate taxes, salaried individual taxes, or federal duties that may have been charged.

This is simply the income tax paid by various markets in the city on the income they generated during this timeframe. And so, this income tax from Karachi’s markets and retailers was 2.3 times what was paid in Lahore, and 2.4 times what was paid in Islamabad, according to a report.

Saddar in Karachi was the largest income tax paying market in the country, dishing out more than Rs77 billion in taxes. Just two major markets in Karachi, Saddar and Jodia Bazaar, paid more taxes than Lahore and Islamabad’s markets combined.

Karachi also has the largest number of tax filers: in excess of 134,000, compared to 117,493 for Lahore, and only 8,084 for Islamabad. Average income tax paid by markets and retailers in Karachi was double what was paid by Lahore, and almost thrice the national average. This is just pure income tax generated by businesses in Karachi, who are potentially more tax compliant than the rest of the markets in the country.

If the average effective tax rate is considered a proxy, then markets in Karachi generated pre-tax income of more than Rs415 billion, which would have crossed more than half a trillion rupees by 2020. This is also at the lower end of the estimate, as massive tax evasion continues to exist—but is somehow still lower than that of the rest of the country if average tax paid, and number of filers is considered.

The market with the highest pre-tax income in the country is Saddar with a turnover of at least Rs309 billion, followed by Tariq Road at roughly Rs19 billion, and Jodia Bazaar at Rs11 billion.  If we add sales tax contributed by these markets, the tally would be much higher.

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