World Bank: Tax Limit Should Be Equal For Salaried & Non-Salaried Class

World Bank Urges Pakistan to Reform Taxation System for Economic Progress

In a recent development, the World Bank has advised Pakistan to revamp its taxation system to foster economic growth and reduce fiscal deficits. The international financial institution has recommended equalizing tax rates for both income-earning and non-income-earning segments of society. This move aims to make personal income taxation more progressive and broaden the tax base by including agricultural income and property taxes.

Challenges in Pakistan’s Economic Landscape:
Pakistan is grappling with a challenging economic scenario, with an unsustainable fiscal deficit. To address these issues, the World Bank suggests a two-fold approach: increasing revenue and curbing expenditures.

Taxation Reforms Proposed:
The World Bank’s proposals include:

1. Equalizing Tax Rates: Currently, there is a disparity in income tax thresholds. The affluent income-earning class faces a threshold of 600,000 rupees annually, while the non-income-earning class’s threshold is 400,000 rupees annually. The World Bank recommends equalizing these thresholds to create a fairer taxation system.
2. Taxing Agricultural Income and Property: The World Bank estimates that if agricultural income and property taxes are implemented effectively, Pakistan could collect approximately 3% of its GDP annually, which translates to more than 30 billion rupees each year.
3. Progressive Taxation: To ensure that the burden falls on those most capable of paying, the World Bank emphasizes the importance of taxing the rich and wealthy while protecting the poor.

International Aid on the Horizon:
The World Bank is also anticipating Pakistan to receive $350 million in aid. However, the date for the approval of this aid package is yet to be confirmed.

Expert Insights:
Tobias Haque, Chief Economist of the World Bank in Pakistan, underscored the need for simplifying Pakistan’s income tax structure and creating a unified tax system. This system would apply to both income-earning and non-income-earning individuals, promoting progressivity and supporting economic growth. Najeed Bin Hussein, the Country Director of the World Bank, also supported these recommendations.

Conclusion:
As Pakistan faces economic challenges, the World Bank’s recommendations for tax reforms are pivotal for sustainable progress. Equalizing tax rates, broadening the tax base, and ensuring a progressive tax system can pave the way for a more stable and prosperous economic future for Pakistan.