World Bank urges Pakistan to implement real estate sector taxation
In a significant development, the World Bank has advised
Pakistan to introduce taxes on the real estate sector as part of a broader
strategy to tackle its fiscal deficit. The World Bank has projected that a
well-implemented tax scheme on real estate could substantially increase
Pakistan's tax revenue, thereby contributing significantly to the country's
fiscal sustainability.
Presently, Pakistan has distinct income tax thresholds for
both salaried and non-salaried individuals. Salaried individuals earning less
than Rs600,000 annually and non-salaried individuals earning less than
Rs400,000 per annum are exempt from income tax.
World
Bank concerned over obstacles in privatization of Pakistan’s State Owned
Entities (SOEs)
Tobias Haque, the World Bank's lead economist in Pakistan,
stressed the necessity for a comprehensive approach to generate revenue and
reduce expenditures in Pakistan's challenging fiscal situation. He stated,
"We recommend that Pakistan simplifies its income tax structure, including
aligning the income tax structure for salaried and non-salaried individuals,
ensuring progressivity."
The World Bank does not advocate reducing the current
nominal income tax threshold. Instead, it proposes a comprehensive tax package
and expenditure reforms to address the unsustainable fiscal deficits. These
reforms encompass reducing subsidy expenditures, eliminating regressive tax
exemptions, and increasing taxation on high-income earners, with a particular
focus on the real estate sector to enhance progressivity in the tax system.
World
Bank expresses disappointment over Pakistan’s tax collection efforts
Protecting low-income individuals during the reform process
is of utmost importance, and the World Bank underscores the significance of
augmenting social protection expenditures for this purpose.
While the World Bank supports the idea of aligning the
income tax structure for salaried and non-salaried individuals gradually, the
primary tax burden is expected to be borne by higher-income segments. The
objective is to establish a fair and sustainable fiscal framework that promotes
Pakistan's economic development.
The recommendations put forth by the World Bank aim to
address Pakistan's fiscal challenges by targeting the real estate sector, all
while safeguarding the interests of the less privileged and creating an
equitable and progressive taxation system for a more financially stable
Pakistan.
Source: Hamari Web