Economy

World Bank Advises Pakistan to Levy Taxes on Agricultural and Real Estate Sectors

World Bank urges Pakistan to reform its tax system

The World Bank has recommended Pakistan to reform its tax system to make it more progressive, equitable, and efficient. The international lender has said that Pakistan could generate up to 3% of GDP (over Rs3 trillion) in additional revenue by taxing the agricultural and real estate sectors, which are currently under-taxed or exempted.

Taxing the rich and protecting the poor

The World Bank’s lead economist in Pakistan, Tobias Haque, said that Pakistan is facing a difficult economic situation with an unsustainable fiscal deficit. He said that the country needs to undertake a combination of measures to increase revenues and reduce expenditures. “We are recommending to tax rich and wealthy while protecting the poor,” he said.

Haque said that the World Bank has suggested a comprehensive tax package that includes simplifying the income tax structure, eliminating tax exemptions, and ensuring progressivity. He said that the same income tax structure should be applied to both salaried and non-salaried individuals, but the change should be introduced gradually and the burden should fall on higher incomes.

He also said that the World Bank has advised Pakistan to improve its tax administration and compliance, especially in the agriculture, property, and retail sectors, which have a large potential for revenue mobilization. He said that these sectors are mostly untaxed or under-taxed due to political resistance, weak enforcement, and lack of data.

Winning the series against fiscal challenges

The World Bank’s Country Director for Pakistan, Najy Benhassine, said that careful economic management and deep structural reforms are required to ensure macroeconomic stability and growth. He said that Pakistan is facing multiple challenges such as high inflation, rising energy prices, severe climate shocks, and insufficient public resources for human development and climate adaptation.

He said that the World Bank is supporting Pakistan’s efforts to restore fiscal sustainability and enhance social protection through various programs and projects. He said that the World Bank is also expecting its Executive Board to approve $350 million for Pakistan under RISE-II (Revenue Mobilization, Investment, and Social Protection for Economic Recovery) program soon.

He said that the World Bank is committed to helping Pakistan achieve its development goals and overcome its economic challenges. “With inflation at record highs, rising electricity prices, severe climate shocks, and insufficient public resources to finance human development investments and climate adaptation, it is imperative that critical reforms are undertaken to build the fiscal space and public means to invest into inclusive, sustainable, and climate-resilient development,” he said.

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