WB Urges Property Sector Taxation for Fairer System

  • WB calls for bringing property sector into tax net.
  • Wants sector to be accurately recorded and taxed.
  • Lender suggests rationalisation of tariff structure.

ISLAMABAD: The World Bank has described Pakistan’s tax system as highly “unfair and absurd,” suggesting that the increasing burden on the salaried class could be alleviated by broadening the tax base and including all incomes in the tax system.

The lender advocated bringing the property sector into the tax net, ensuring its accurate recording and taxation. Additionally, it proposed rationalising the tariff structure, noting that short-term gains are causing losses to long-term revenue streams.

During a session titled “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust” at the Pakistan Institute of Development Economics (PIDE), Vice-Chancellor Nadeem Javaid raised concerns that 40% of development spending is lost to commissions, as no bill is cleared without a 5% to 7% share for the Accountant General Pakistan Revenues (AGPR), a fact widely acknowledged.

Other participants at the PIDE conference session suggested that Pakistan needs to reform its taxation system by expanding the tax base, fully digitising processes, and reducing the burden on the salaried class.

Tobias Haque, the World Bank’s lead country economist, commended the provinces for imposing the Agriculture Income Tax (AIT), calling it a step in the right direction. He emphasised that accurate documentation and taxation of the property sector are now crucial.

Haque added that digitalisation and broadening the tax base to include all income streams could help ease the tax burden on the salaried class.

He noted that it is “absurd” that only 5 million people file tax returns in a country of 240 million, while a significant portion of revenue comes through the regressive General Sales Tax (GST). He stated that Pakistan’s tax system is inequitable and unsustainable with only 5 million return filers.

Dr Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), advocated for reducing the number of withholding taxes (WHTs). He mentioned that there are 88 withholding taxes, with 45 generating less than Rs1 billion annually, stressing the need for clarity and simplification. He noted that the Federal Board of Revenue (FBR) currently collects Rs1.2 trillion annually through WHTs.

The panellists concurred that despite the availability of tools and diagnostics, Pakistan has yet to achieve meaningful tax digitisation due to political resistance, outdated legal frameworks, institutional disconnects, and a lack of administrative motivation. They highlighted that successful digital transformation requires end-to-end system integration, real-time data access, and automated workflows.

A recurring theme was the erosion of public trust in the tax system, driven by inconsistent policies, limited transparency, and a skewed tax burden. Speakers emphasised the need for simplified tax codes, integrated digital infrastructure, updated labour laws, and performance-based incentives to restore taxpayer confidence.