World Bank Urges Property Taxation and Digitization to Reform Pakistan’s Tax System

The World Bank has delivered a sharp rebuke of Pakistan’s unfair tax system, demanding the inclusion of property taxation to ease the crushing burden on the salaried class and urging accurate documentation and equitable property taxes nationwide. Speaking at a Pakistan Institute of Development Economics (PIDE) conference session titled “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust,” Tobias Haque, the World Bank’s lead country economist, exposed the glaring flaws in the system.

Haque called it “absurd” that only five million Pakistanis file tax returns in a population of 240 million, forcing reliance on the regressive General Sales Tax (GST) for revenue. He warned that this narrow tax base undermines fairness and sustainability. The World Bank also pushed for rationalized tariff structures, noting that while current tariffs boost short-term revenue, they jeopardize long-term financial stability.

Nadeem Javaid, PIDE’s Vice Chancellor, revealed alarming leakage in development spending, estimating that 40% of funds are siphoned off through commissions and corrupt practices. He disclosed that 5% to 7% commissions are an open secret in financial bill approvals, highlighting systemic inefficiencies.

Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), criticized the complexity of withholding taxes, pointing out that among 88 withholding taxes, 45 generate less than Rs1 billion annually, yet the Federal Board of Revenue (FBR) collects Rs1.2 trillion through these mechanisms. He urged simplification to enhance efficiency.

Panellists stressed the need for full digitization of Pakistan’s tax infrastructure, citing political resistance, outdated legal frameworks, and poor institutional coordination as major hurdles. They proposed real-time data integration, automated processes, and modernized labor laws to strengthen tax administration.

The discussion underscored growing public distrust in the tax system, fueled by inconsistent policies, lack of transparency, and disproportionate burdens on compliant taxpayers. To rebuild confidence, panellists called for simpler tax rules, greater transparency, and digitized processes. Haque praised the Agriculture Income Tax (AIT) introduced by provincial governments as a positive step toward a fairer and more equitable tax framework.