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A World bank analysis found that the General Sales Tax (GST) is the main cause of Pakistan’s rising poverty rate, whereas the monthly cash transfer program for the poorest families has the greatest beneficial effect on lowering inequality.
In a report titled “The Impact of Taxes and Transfers on Inequality and Poverty in pakistan,” the World bank said that over 7% of households’ pre-tax expenses go toward GST payments, which further impoverishes low-income and vulnerable families. The biggest factor contributing to the rise in national poverty is the GST.
According to a World bank study cited by “Dawn” on Sunday, May 25, 2025, the estimated contribution of personal financial tools—or, when all other financial instruments are taken into account, the estimated contribution of personal financial tools—shows that personal financial tools have an additional effect on poverty or inequality, indicating that the GST has the largest contribution to the rise in national poverty.
Spending on preschool and primary education has the second-largest impact on inequality.
According to the report, pakistan should increase the efficiency of its public spending and domestic income mobilization in the future to create more fiscal room. Expanding social spending and targeted transfers, as well as enhancing fiscal equity, should be the top priorities for the extra-budgetary headroom. To enhance the quality and accessibility of public health and education services in pakistan, the research suggests spending reforms. These changes may have long-term effects on reducing poverty and inequality.
It also identifies issues with the nation’s tax structure, arguing that it deprioritizes progressive direct taxation in favor of revenue collection from more often impoverishing indirect taxes and regressive and wasteful subsidy spending. The most vulnerable and impoverished households, according to the research, are net payers into the fiscal system, which means that the amount of benefits they receive is less than the amount of taxes they pay.
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