Islamabad: The World Bank has heavily criticized Pakistan’s tax system, labeling it as “highly unfair and absurd.”
In a recent discussion, the World Bank highlighted several key flaws in the country’s fiscal framework that have led to inefficiency and public distrust.
One of the primary concerns is the extremely narrow tax base, with only 5 million individuals filing tax returns in a nation of approximately 240 million people.
This creates an unbalanced tax burden, with the salaried class shouldering a disproportionate share of the tax load.
The World Bank stresses the importance of broadening the tax net to encompass all income streams, particularly targeting the property sector to ensure comprehensive taxation.
The World Bank also recommended a rationalization of the tariff structure, which it claims has been focused on generating short-term revenue gains at the cost of long-term financial stability.
This short-sighted approach needs to be restructured to secure more sustainable revenue streams for the government.
Additionally, the Bank advocates for the digitization of Pakistan’s tax system, urging the inclusion of all income types within the system to reduce the strain on the salaried workforce.
A significant issue raised by the World Bank is the lack of proper documentation and tax evasion within the property sector.
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The absence of transparency and clear financial records in this area has led to substantial revenue losses.
Moreover, political resistance, outdated legal systems, and a disconnect between institutions have contributed to delays in fully modernizing and digitizing Pakistan’s tax collection infrastructure.
Experts from both the Pakistan Institute of Development Economics (PIDE) and the Policy Research Institute of Market Economy (PRIME) also expressed concerns, calling for a simplification of the tax code, reduction in withholding taxes, and a concerted effort to rebuild public trust through clearer, more transparent policies.
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They emphasized that the country’s tax system needs to be modernized in order to address these critical issues and create a fairer system for all citizens. Story by AHmed Mukhtar.
