The World Bank has suggested that changes in tax policies could increase the share of taxes in Pakistan’s economy by 2%. Additionally, imposing taxes on agricultural income might raise the tax share by 1%, as per a World Bank report.
In Pakistan, there are around 114 million people with jobs, but only 8 million of them are officially registered as income taxpayers, according to the World Bank.
The report highlights that a majority of tax revenue in Pakistan comes from indirect taxes, with only 33% generated from direct taxes.
The real estate sector attracts more investments due to lower taxation rates, diverting funds away from the production sector.
Land taxation rates in Pakistan have historically been low, with approximately 90% of cultivators not required to pay taxes.
The World Bank suggests that agricultural land could be used for generating revenue for other purposes.
Pakistan’s tax system is complex, with unclear jurisdiction between the federal and provincial authorities, leading to overlapping responsibilities that impact tax collection.
The World Bank recommends that provincial governments should focus on taxing untapped wealth in two key areas within their jurisdiction—real estate and agriculture. This would help improve public services and reduce the financial burden on the central government.
