A Comparative Analysis of Tax Liabilities: Salaried Individuals Versus Associations of Persons (AOPs) Under Pakistan's 2025 Tax Regime

Abstract

This in-depth research article examines how Pakistan's Income Tax Ordinance, 2001, as amended by the Finance Act 2025, taxes salaried individuals and AOPs in different ways. The analysis reveals significant differences in tax rates, compliance requirements, and tax burdens among various classes of taxpayers who work for a salary, benefit from lower progressive tax rates, and have easier tax withholding. AOPs charge more and have more stringent rules for following the rules, especially if they have corporate members or make more than a certain amount. This paper examines these inequities through legal, economic, and equity lenses, utilizing Pakistan's tax documents and judicial precedents. The findings suggest that existing imbalances may lead to horizontal injustices and influence corporate structural decisions, necessitating a reassessment of policy to establish a more equitable and efficient tax system. It is suggested that the law be amended to make it easier to comply with the rules while ensuring that the government receives its revenue.