Pakistan Urged to Target Wealthier Sectors for Enhanced Tax Collection
The World Bank Urges Taxation Strategy Revision
The World Bank has advised Pakistan’s caretaker government to reevaluate its taxation approach by focusing on wealthier sectors such as agriculture, real estate, and retail. This strategic shift has the potential to generate an additional 4% of GDP or over PKR4 trillion (USD1 = PKR280.328) in short-term revenue, according to Najy Benhassine and Tobias Haque, the World Bank’s lead economists for Pakistan.
Role of Provincial Governments and Taxation Strategies
The economists emphasized the significance of provincial governments in implementing these taxes to alleviate federal fiscal pressure and improve services. They proposed strategies such as eliminating tax exemptions and expanding the tax net to encompass untapped wealth in these sectors.
Improving Land Taxation and Real Estate Valuation
Furthermore, they suggested enhancing land taxation by establishing reliable land ownership records. They also recommended harmonizing the three existing land and real estate valuation systems, which could increase the tax-to-GDP ratio by 5%. Raising property tax rates to match those in comparable countries was another suggestion put forth by the economists.
Simplifying the Income Tax Structure
Najy Benhassine pointed out that salaried individuals are nearing their maximum taxation potential. Thus, the economists called for simplifying the income tax structure for both salaried and non-salaried individuals. However, they clarified that personal income tax reforms are not currently a priority for the World Bank.
Austerity Measures for Economic Stability
The economists also recommended implementing austerity measures, including a 2.7% GDP expenditure cut, to ensure economic stability. This advice comes in light of Pakistan’s revenue collection over the past decade, averaging a lower 12.8% of GDP compared to the South Asian average of 19.2%.
This article was written with the support of AI and reviewed by an editor.
