World Bank asks Pakistan to tax agricultural, real estate sectors

Pakistani salaried class paid Rs264 billion of tax in FY 2022-23
Pakistani exporters paid Rs74 billion while retailers paid Rs15 billion of tax in FY 2022-23
Pakistani Agri and real estate sector should be charges Rs3000 billion/years

World Bank’s lead economist for Pakistan Tobias Haque said that Pakistan should simplifies its income tax structure, including aligning the income tax structure for salaried and non-salaried individuals ensuring progressivity.

The highest priority areas for increasing tax collection were the agriculture and property sectors where there was a lot of wealth, said Tobias Haque.

The lender has projected that if agriculture income and properties tax is enforced properly then it could fetch 3% of GDP in the tax collection on an annual basis, equivalent to slightly over Rs3 trillion.

To collect 2% of GDP in taxes from land and real estate, the bank has proposed harmonisation of three different valuation systems, increase in property tax rates and change in land classification for taxation purposes.

Pakistan’s tax system is designed for revenue extraction, not for revenue mobilisation, said Sajid Amin, an economist working with the Sustainable Development Policy Institute (SDPI).

World Bank on progressive Personal Income Tax

The World Bank has asked Pakistan to tax the agricultural and real estate sectors and recommended the merging of salaried and non-salaried class thresholds for a progressive Personal Income Tax (PIT).

“Personal income tax reforms are not the priority of the World Bank,” said Tobias while explaining the lender’s view about its recent controversial recommendation about imposing taxes on income below Rs50,000 per month.

The World Bank on taxing people earning below Rs50,000 per month clarified its stance that this recommendation was based on 2019 data, which needed to be updated in light of recent inflation and labour market conditions.