World Bank advocates taxing individuals earning less than Rs
50,000 a month
In a potentially impactful move for Pakistan's financial landscape, the World Bank has recommended the imposition of taxes on individuals earning Rs 50,000 or less per month.
If approved by the cabinet, these proposals are poised to
bring significant changes to the country's tax policies.
Expanding the Tax Base:
The World Bank's recommendations, as detailed in the
Pakistan Development Outlook report, are aimed at bolstering Islamabad's fiscal
sustainability.
One of the central proposals is the expansion of the tax
base to encompass previously untaxed sectors.
World
Bank expresses disappointment over Pakistan’s tax collection efforts
Progressive Taxation System:
Among the suggested measures is the introduction of a
progressive tax rate system. Under this system, individuals with a monthly
income of five lakh rupees would be subject to a 35% tax rate.
This proposal is expected to generate additional revenue for
the government.
Calls for Federal Spending Reduction:
Additionally, the World Bank has called on the federal
government to reduce spending in areas falling within the provinces'
jurisdiction. This move is intended to enhance financial discipline and
accountability in service delivery.
The report also emphasizes the need for a comprehensive
review of the Seventh National Finance Commission and stresses the importance
of collaboration between federal and provincial levels in crafting financing
plans.
Proposed
tax on forex exchange income to reduce banks’ profits up to 11%
Broadening the Tax Net:
To further expand the tax net, the World Bank has
recommended the inclusion of vendors in the tax system and a reduction in the
threshold for tax-free income.
The objective is to increase revenue collection and ensure
that a wider segment of the population contributes to the country's financial
stability.
Simplifying Tax Structures:
Another notable recommendation from the World Bank involves
simplifying the personal income tax structure and introducing taxes on owners
of agricultural land exceeding 12.5 acres.
These measures aim to make the tax system more equitable and
effective.
Expert Concerns:
However, experts have expressed concerns about the potential
impact of these proposed reforms on the salaried class, which already bears a
significant tax burden on their gross earnings.
Critics argue that such changes may further strain the
financial resources of this group.
Rising Poverty Levels:
In contrast to the World Bank's suggestions, Pakistan has
been grappling with rising poverty levels in fiscal year 2023.
Sluggish economic growth and soaring inflation have led to
an increase in the poverty headcount, with nearly 40% of the population now
falling below the Lower-Middle Income Country poverty threshold.
This disparity between recommended reforms and real-world
conditions underscores the challenges faced by the country's economic
policymakers.
Source: Samaa TV