The World Bank, in its latest ‘Pakistan Development Update,’ has recommended imposing more taxes on the salaried class as a means of broadening the tax base and restoring fiscal responsibility.
The bank highlighted that the income tax exemption threshold for salaried individuals in Pakistan is set too high, leaving many formally employed salaried individuals outside the tax net.
It also noted disparities in tax-free allowances, tax brackets, and tax rates between salaried individuals and other taxpayers, which can lead to economic distortions and tax avoidance. The World Bank suggested reducing the tax-free threshold, simplifying the personal income tax structure, and merging tax schedules for salaried and non-salaried taxpayers to eliminate tax arbitrage.
Additionally, it recommended removing concessional rates on sales tax on goods and limiting tax exemptions on specific transactions and services.