In a bid to bolster its revenue collection and fiscal stability, Pakistan is set to implement a progressive taxation policy that focuses on individuals with monthly incomes of 50,000 rupees or lower. The move, recommended by the World Bank, aims to address economic disparities and enhance the country’s fiscal sustainability.
Taxation Restructuring
Under the proposed policy, individuals earning over five lakh rupees monthly will be subject to a 35% tax rate. This measure is expected to generate substantial revenue for the government while reducing the tax burden on low-income earners. Moreover, the federal government will refrain from allocating funds to sectors falling under provincial jurisdiction, promoting greater financial autonomy among provinces.
Reevaluating the NFC Award
In line with the World Bank’s recommendations, Pakistan will conduct a comprehensive review of the seventh National Finance Commission (NFC) award. This reassessment aims to ensure a fair distribution of financial resources between the federal and provincial governments, aligning with the country’s evolving economic landscape.
Incorporating Shopkeepers into the Tax System
To broaden the tax base, Pakistan plans to bring shopkeepers into the tax net. This strategic move will ensure that small business owners contribute their fair share to the country’s economic development.
Lowering the Tax-Free Income Threshold
The proposed policy also suggests lowering the threshold for tax-free income, which will help increase revenue collection and contribute to Pakistan’s fiscal stability.
Simplifying Personal Income Tax
Simplifying the structure of personal income tax is another key aspect of the new taxation policy. By making the tax system more accessible and transparent, Pakistan aims to encourage compliance and fair tax contributions.
Agricultural Land Taxation
The World Bank’s recommendations include imposing taxes on owners of agricultural land exceeding 12 acres. This measure aims to redistribute wealth and promote equity in Pakistan’s tax
