Pakistan collects only half of taxes from its total capacity: World Bank notes

ISLAMABAD, Nov 25 (INP): The World Bank Group (WBG) has asserted that Pakistan has been receiving only 50 percent of the taxes from its total capacity.

“Governments cannot function where businessmen do not pay taxes […] most retailers in Pakistan do not pay tax,” it remarked.

The WBG further observed that the federal government has given considerable concessions to the agriculture, construction and textile sectors.

The World Bank, while noting the uneasy taxation system of the state, affirmed that the companies providing services have to file 60 tax returns a year.

It pointed out that companies have been separately liable to the center and the provincial headquarters of tax collection bodies.

The bank has urged the federal government and the provinces to work together for simplification of the taxation system.

On Nov. 6, Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh said Pakistan valued the financial and technical support provided by the World Bank Group for the institutional reforms and economic development.

He had spoken to WBG Vice President Ms Ceyla Pazarbasioglu who was accompanied by Illango Patchamuthu, WBG Country Director.

Ms Ceyla Pazarbasioglu is the Vice President for Equitable Growth, Finance and Institutions (EFI) at the WBG. She oversees a portfolio of nearly $30 billion of operational and policy work.

During the meeting, the adviser had appreciated the support being provided by the WBG to Pakistan and had highlighted the government’s focus on expediting speedy roll-out of the World Bank pipeline of projects and actions were being taken in this regard.

Ms Pazarbasioglu had appreciated the economic reforms programme initiated by the government to stabilise the Pakistani economy and accelerate broad-based growth.

The WBG team had also congratulated the adviser on the improvement on the ranking of the Ease of Doing Business (EoDB).

The team had discussed the Resilient Institutions Strengthening Programme (RISE) with Mr Sheikh. The discussion included an integrated Debt Management Office in the finance division. The meeting had also focused on areas of harmonisation of tax regime, circular debt strategy and National Tariff Policy matters.

The team had apprised Mr Sheikh on the WBG’s assistance being provided to harmonise the sales tax across Pakistan to further improve the business environment and enhance revenue collection.

In this regard, the adviser was also updated on the progress under the USD 400 million Pakistan Raises Revenue Project which aims to strengthen the Federal Board of Revenue (FBR) and create a sustainable increase in Pakistan’s domestic tax revenue.

The project will target raising the tax-to-GDP ratio to 17 percent by financial year 2023-2024 and widening the tax net from the current 1.2 million to at least 3.5 million active taxpayers.

The project will assist in simplifying the tax regime and strengthening tax and customs administration. It will also support the FBR with technology and digital infrastructure and technical skills.

The government has set improving tax revenue with low compliance costs as a high priority.