World Bank asks Pakistan to tax agricultural, real estate sectors

The World Bank has proposed eliminating all tax exemptions and incorporating agriculture, retail, and real estate into a tax framework that could contribute three percent of Pakistan’s GDP, according to media reports.

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The objective is to address Pakistan’s financial challenges. The untaxed wealth in two significant provincial sectors, real estate and agriculture, should be taxed by provincial governments to enhance services and ease the fiscal pressure on the central government, as stated by WB’s Country Director Najy Benhassine and senior economist Tobias Haque.

It is estimated that effective enforcement of agriculture income and property tax could yield three percent of GDP in annual tax collection, amounting to slightly over Rs 3 trillion. Real estate and agriculture are expected to generate two percent and one percent of the GDP, respectively, translating to approximately Rs 2.1 trillion and Rs 1 trillion based on the official GDP size. The World Bank recommends comprehensive reforms, urging Pakistan to tax the affluent while safeguarding the poor. This suggestion is part of a strategy to alleviate unsustainable fiscal deficits and uplift the vulnerable segments of the population. In September 2023, the World Bank highlighted a surge in poverty in Pakistan, urging urgent measures to achieve financial stability.