ISLAMABAD: The World Bank has described Pakistan’s tax system as “extremely unfair and absurd” and emphasized the need to effectively bring property into the tax net and ensure proper registration and taxation.
According to the World Bank, the growing burden on salaried classes can only be alleviated if the tax net is expanded and all sources of income are included within it.
The World Bank added that reforms are necessary in the revenue system because while short-term benefits are being gained from the current system, long-term income opportunities are being lost.
Regarding expenditures, PIDE Vice Chancellor Nadeem Javaid revealed that 40% of the development budget is wasted in the form of commissions, as no bill is cleared without giving a commission of 5 to 7% without the approval of the Auditor General of Pakistan (AGPR). He said, “This is a reality, and everyone knows it.”
Tobias Haque, Lead Country Economist at the World Bank, speaking at a panel discussion on “Pakistan’s Fiscal Path: Promoting Transparency and Trust” organized by PIDE in Islamabad, said, “Taxing agricultural income at the provincial level is a positive step, and now the property sector should also be properly registered and brought into the tax net. Expanding the tax net through a digital system and including all income can ease the burden on salaried classes.”
He expressed surprise that only 5 million people file tax returns in a population of 240 million, and most of the tax is collected in the form of General Sales Tax (GST). He said, “Pakistan’s tax system is unfair in terms of justice, and if the country continues with only 5 million filers, no sustainable solution will be possible.”
Dr. Ali Salman, Executive Director of PRIME, stated that clarity is needed in the system and the number of withholding taxes should be reduced. He explained that there are currently 88 withholding taxes, 45 of which generate less than one billion rupees in revenue.
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