World Bank advises tax reforms in Pakistan to ease debt burden

The World Bank (WB) has highlighted that concerning issue about Pakistan is collecting a lower amount of tax than its full potential.

According to the WB’s report, Pakistan falls short by a significant Rs737 billion in tax collection, and it has urged Islamabad to take action to address this gap, thereby alleviating the burden of debts.

In response to these findings, the WB has proposed several key strategies for Pakistan to bolster its tax revenues. One prominent recommendation is to enhance tax collection from sectors such as agriculture, real estate, and retail businesses.

The report suggests that substantial untaxed wealth is concentrated in the provincial domains, particularly within the real estate and agriculture sectors. To address this, the WB suggests that provincial governments should impose taxes on these sectors in order to broaden the revenue base. Additionally, the report reveals that the real estate sector in Pakistan is currently contributing Rs402 billion less in taxes than its actual capacity.

Furthermore, the WB advises Pakistan to streamline its income tax structure, creating a more unified approach for both salaried and non-salaried individuals. The goal is to ensure fairness and progressivity in the tax system, promoting greater equity.

Another proposal put forward by the WB is an increase in the Federal Excise Duty on cigarettes, which could potentially yield up to Rs268 billion in tax revenue from this sector.

It’s worth noting that earlier recommendations from the World Bank also emphasized the importance of reducing various subsidies to save money. Specifically, the report suggests that around 167 billion rupees could be saved by revising the Tariff Differential Subsidy (TDS) program.

In conclusion, the World Bank’s report highlights the need for Pakistan to optimize its tax collection mechanisms and close the existing revenue gap. By implementing the suggested strategies, Pakistan has the potential to strengthen its fiscal position and reduce its dependency on debt.

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