- Friday, December 08, 2023
The lender urges Islamabad to take urgent steps to tax its agriculture and real estate sectors
By: Chandrashekar Bhat
POVERTY in Pakistan shot up to 39.4 per cent as of last fiscal year, with 12.5 million more people falling into the trap due to poor economic conditions, the World Bank has said.
It urged the cash-strapped country to take urgent steps to achieve financial stability.
The Washington-based lender on Friday (22) unveiled draft policy notes that it prepared with the help of all stakeholders for Pakistan’s next government ahead of the new election cycle, The Express Tribune newspaper reported.
Poverty in Pakistan rose within one year from 34.2 per cent to 39.4 per cent, with 12.5 million more people falling below the poverty line of the $3.65 per day income level, according to the World Bank. About 95 million Pakistanis now live in poverty, it said.
Pakistan’s economic model is no longer reducing poverty, and the living standards have fallen behind peer countries, said Tobias Haque, the World Bank’s lead country economist for Pakistan.
The global lender urged Pakistan to take urgent steps to tax its ‘sacred cows’ agriculture and real estate and cut wasteful expenditures in an effort to achieve economic stability.
Pointing out that the increase in poverty was consistent with ground realities, the World Bank identified low human development, unsustainable fiscal situation, over-regulated private sector, agriculture and energy sectors as the priority areas for reforms for the next government.
The lender’s note on strengthening government revenues showed a host of measures to improve the revenue-to-GDP ratio by five per cent through the withdrawal of tax exemptions and increasing the burden of taxes on the real estate and the agriculture sectors.
“The World Bank is deeply concerned about the economic situation of today,” Haque said.
He added that Pakistan is facing serious economic and human development crises, and is at a point where major policy shifts are required.
This may be Pakistan’s moment for significant policy shift, said Najy Benhassine, the country director for Pakistan at the World Bank.
Pakistan has the capacity to collect taxes equal to 22 per cent of the GDP, but its current ratio is only 10.2 per cent showing a gap of more than half, according to the World Bank note.
The lender proposed reducing distortive exemptions to generate taxes equal to two per cent of the GDP. It wanted an increase in taxes on land and property to collect another two per cent of GDP in revenues and generate another one per cent of the GDP from the agriculture sector.
The World Bank proposed a mandatory use of CNIC (Computerised National Identity Card) for transactions, particularly of assets.
(PTI)
