WB calls Pakistan's tax system is unfair, inefficient

Islamabad: The World Bank has called Pakistan’s tax system “extremely unfair and inefficient” and urged that property be effectively brought into the tax net and its proper registration and taxation be done.

According to the World Bank, the growing burden on the salaried class can be reduced only if the tax net is widened and all income is included in it.

The World Bank further said that the revenue system needs to be reformed because the current system is yielding short-term benefits but is losing long-term revenue opportunities.

Regarding expenditure, Pakistan Institute of Development Economics (PIDE) Vice Chancellor Nadeem Javed revealed that 40 percent of the development budget is wasted in the form of commissions because no bill is cleared without the Auditor General of Pakistan (AGPR) paying a commission of 5 to 7 percent.

“This is a fact and everyone knows it,” he said. “The provincial-level tax on agricultural income is a positive step, now the property sector should also be properly registered and brought into the tax net,” said Tobias Hauck, Lead Country Economist at the World Bank, in a panel discussion at the conference “Pakistan’s Fiscal Path: Promoting Transparency and Trust” organized by the PIDE in Islamabad. Expanding the tax net through a digital system and including all income can pave the way for reducing the burden on the salaried class.

He expressed surprise that only 5 million people out of a population of 240 million file tax returns, and most of the tax is collected in the form of General Sales Tax (GST).

Pakistan’s tax system is unfair in terms of the principles of justice. If the country continues to function with only 5 million filers, then no lasting solution is possible, added PIDE Vice-Chancellor.

Prime Executive Director Dr Ali Salman said that the system needs to be clarified and the number of withholding taxes should be reduced.

He added that currently there are 88 withholding taxes, out of which 45 taxes have a revenue of less than Rs1 billion.