World Bank sees ‘gaping holes’ in Pakistan’s tax system

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World Bank sees ‘gaping holes’ in Pakistan’s tax system

Terms dependence on remittances beneficial only in short-term.

Updated On: Thu, 17 Apr 2025

14:20:11 PKT

ISLAMABAD (Dunya News) – Describing the tax system of Pakistan as “unfair and absurd”, the global lender World Bank (WB) called for effectively bringing the property into the tax net and that it should be taxed proportionally and all the record must be kept accurately. 

According to the WB, the burden on the weighed down salaried class could only be reduced if all segments of society were added into the tax base, hence broadening the overall tax net. 

About remittances, the WB called for reforms in the system of remittances while terming the dependence on the remittances beneficial only in the short-term. 

Pakistan Institute of Development Economics (PIDE) Vice Chancellor Nadeem Javaid wondered on the low tax-to-GDP ratio in Pakistan, saying only 5 million people out of 240 million population paid their taxes whereas most of the tax is collected in form of the General Sales Tax (GST). 

Javaid cautioned against continuation of current tax collection system with only 5 million filers, adding that the ongoing system was completely unfair. 

Tobias Haque, who is the World Bank’s lead country economist, lauded the imposition of the Agriculture Income Tax (AIT) by provinces by terming it a step in the right direction. 

Haque underscored the need fot accurate documentation and taxation of the property sector. 

Read more: Economy is stable and developing Finance Minister Aurangzeb

“Digitalisation and broadening the tax base to include all income streams can help ease the tax burden on the salaried class,” he added. 

Besides, Dr Ali Salman, who is the Executive Director of the Policy Research Institute of Market Economy (PRIME), called for reduction in the number of withholding taxes (WHTs).

“There are 88 withholding taxes, and 45 of them generate less than Rs1 billion annually. We need clarity and simplification,” he said.

He said that the Federal Board of Revenue (FBR) currently collects Rs1.2 trillion annually through withholding taxes.

 

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