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The World Bank retracts tax statement has reversed its recommendation regarding taxing monthly salaries below Rs50,000 in Pakistan, citing fresh data that indicates salaried individuals have contributed more taxes than the combined taxes paid by the richest exporters and the real-estate sector over the past three months.Thank you for reading this post, don’t forget to subscribe!
During the July-September period of the current fiscal year, salaried individuals in Pakistan paid a total of Rs70.6 billion in income tax, surpassing the combined tax contribution of the wealthiest exporters and the influential real estate sector, according to government statistics.
The World Bank clarified that its initial recommendation to impose taxes on incomes below Rs50,000 per month was based on 2019 data and needs to be updated to account for recent inflation and labor market conditions. The lender emphasized that it does not recommend a specific new level for income tax exemption but rather suggests conducting a new survey to determine an appropriate threshold that protects low incomes.
World Bank retracts tax statement: All Details
The World Bank advocates for comprehensive tax reforms to make the overall tax system more progressive, placing a heavier tax burden on the wealthier population segments. These reforms should involve reducing subsidy expenditures, eliminating regressive tax exemptions, and increasing taxation on high-income earners, including improved taxation of agriculture, property, and retail sectors.
The reversal comes after the last Pakistan Democratic Movement (PDM) government increased the World Bank retracts tax statement tax burden on the salaried class, leading to an additional tax burden of Rs17.7 billion on salaried individuals in just three months.
During the first quarter of the current fiscal year, salaried individuals contributed 33% more income tax compared to the same period in the previous fiscal year. They represented the fourth-largest group of contributors to withholding taxes, following contractors, bank depositors, and importers.
In contrast, exporters who earned $7 billion or Rs2 trillion in the first quarter paid only Rs21 billion in taxes, with their income tax contribution dropping from 4% to 3.6% of the total withholding taxes in the current fiscal year. The real estate sector contributed Rs44 billion in taxes on the sale and purchase of plots, despite a slight increase in their tax burden in the budget.
The data underscores the significant tax contribution of the salaried class in Pakistan,World Bank retracts tax statement despite the challenges they face, including limited access to private vehicles.