WB recommends equal tax threshold for salaried, non-salaried class in Pakistan 

Islamabad: The World Bank has asked Pakistan to equalize the tax thresholds of salaried and non-salaried classes to make personal income tax progressive and bring agricultural income and property into the tax net.

According to details, the World Bank estimates that if taxes on agricultural income and property are properly implemented, it can generate close to three percent of Gross Domestic Product (GDP) on an annual basis and more than 30 trillion rupees annually.

The World Bank is also expecting $350 million for Pakistan from Rise-II, but the date of the Executive Board meeting to approve it is yet to be confirmed.

The tax threshold for the top salaried class is Rs0.6 million per annum. Above this the tax is levied on the salary, while for the non-salaried class the income threshold is Rs0.4 million per annum.

Pakistan is suffering from a very difficult situation and its financial deficit is such that the economy cannot be sustainable, therefore it is needed to increase the income on the one hand and reduce the expenditure on the other hand.

World Bank's Chief Economist in Pakistan, Tobias Haque, while talking to a few selected journalists, said on Monday, “We are recommending taxing the rich and protecting the poor while protecting the poor”. World Bank Country Director Najey Ben Hassin was also present on this occasion.

He said that the World Bank is certainly not recommending a reduction in the current minimum threshold. We are recommending that Pakistan should simplify its income tax structure and set up a single tax system for the salaried and non-salaried classes and promote progressivism.

A previous analysis of public expenditure revision data for 2019 suggests that a reformed income tax structure could include a minimum exemption limit for the salaried class. But this analysis is based on recent inflation and labor market developments. The changes should also be taken into account so that the lower income groups are not affected.

The recommendations in Pakistan's development update are clear. However, when asked if the World Bank is recommending a single income tax structure for salaried and non-salaried individuals, then he agreed.