The World Bank has termed Pakistan’s tax system as “extremely unfair and absurd” and emphasized that property must be effectively brought into the tax net with accurate registration and taxation, as reported by national media.
According to the World Bank, the growing burden on the salaried class can only be reduced if the tax net is expanded and all income is included. The World Bank further stated that the revenue system needs reform because the current system yields short-term gains but misses long-term revenue opportunities.
Regarding expenditures, PIDE Vice Chancellor Nadeem Javed revealed that 40% of the development budget is wasted as commissions, since no bill is cleared without a 5 to 7 percent commission without the Auditor General of Pakistan (AGPR). He said, “This is a fact, and everyone knows it.”
Tobias Haque, the World Bank’s Lead Country Economist, said at a panel discussion during the PIDE-hosted conference in Islamabad titled “Pakistan’s Fiscal Path: Promoting Transparency and Trust”:
“Taxation of agricultural income at the provincial level is a positive step. Now the property sector must also be properly registered and brought into the tax net. Expanding the tax net and including all income through digital systems can help reduce the burden on the salaried class.”
He expressed surprise that out of a population of 240 million, only 5 million people file tax returns, and most tax revenue is collected in the form of General Sales Tax (GST). He said, “Pakistan’s tax system is unfair in terms of the principles of justice. If the country continues to operate with only 5 million filers, no sustainable solution is possible.”
PRIME’s Executive Director Dr. Ali Salman said that the system needs clarity and the number of withholding taxes should be reduced. He informed that currently there are 88 withholding taxes, of which 45 generate less than one billion rupees in revenue.
