World Bank Calls Pakistan’s Tax System Unfair and Absurd

The World Bank has strongly criticised Pakistan’s current tax framework and called it “unfair and absurd” while urging the government to expand the tax base by properly documenting and taxing property and other untaxed income sources. The lender stressed that the excessive burden on the salaried class can only be reduced through comprehensive reform and inclusion of all income streams in the tax net, reported a news daily. World Bank Lead Country Economist Tobias Haque said at the Pakistan Institute of Development Economics’s (PIDE) conference “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust” that Pakistan’s reliance on the regressive General Sales Tax (GST), combined with only five million active tax filers in a country of 240 million, has rendered the system unsustainable. Haque stressed the importance of digitisation and systemic reform to improve transparency and reduce inequity. PIDE Vice Chancellor Dr Nadeem Javaid highlighted deep flaws in public expenditure, stating that up to 40% of Pakistan’s development spending is lost to commissions. Dr Ali Salman, Executive Director at PRIME Institute, criticised the complexity of the current withholding tax regime, noting that 45 out of 88 withholding taxes each generate less than Rs. 1 billion annually. He called for a major simplification of the tax code, highlighting that the Federal Board of Revenue currently collects Rs. 1.2 trillion from WHTs alone. Participants warned that the current tax structure is eroding public trust due to inconsistent policies and a lack of transparency. They called for simplified tax codes, updated labour laws, and performance-based incentives to rebuild confidence in the tax system.