World Bank urges Pakistan to eliminate tax exemptions

The World Bank (WB) on Monday urged Pakistan to close all tax exemptions and bring incomes from agriculture, properties and retail businesses under the effective tax net to generate an additional revenue of up to four per cent of GDP (about Rs4 trillion) in the short term. Speaking at a media briefing, WB’s Country Director Najy Benhassine and senior economist Tobias Haque said the people in two major areas in the provincial jurisdiction — real estate and agriculture — had most of the untaxed wealth, which should be taxed by the provincial governments to be able to improve services and reduce the financial burden on the centre, which was financing these services. Mr Haque said that real estate and agriculture should yield a revenue of 2pc and 1pc, respectively, of the GDP (or about Rs2.1 trillion and Rs1tr, respectively, according to official GDP size). He said the bank had submitted a detailed policy paper to the government in this regard. The paper advocates increasing revenues through improved, expanded and progressive agriculture income taxation. This should be done immediately to “reduce or refine the current 12.5-acre tax exemption threshold to bring more agriculture land into the tax net” and ensure appropriate categorisation of land on the basis of size, location, irrigation status and area-based productivity aspects into tax rates.