ISLAMABAD — In a sharp critique of Pakistan’s tax system, the World Bank has called it “unfair and absurd,” urging urgent reforms to fix the country’s broken fiscal structure. At the heart of its recommendations: bring property into the tax net, digitise the system, and reduce the overwhelming burden on the already-taxed salaried class.
Speaking at a high-level session titled “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust” during the PIDE Conference, World Bank’s lead economist Tobias Haque didn’t hold back. He pointed out the alarming reality that only about 5 million people file tax returns in a country of 240 million—while the majority of the government’s revenue comes through highly regressive indirect taxes like the General Sales Tax (GST).
“It’s simply unsustainable,” said Haque. “You can’t build a fair system on the shoulders of so few, while many with significant wealth—especially in real estate—go untaxed.”
Haque praised the provinces for taking steps to introduce Agriculture Income Tax (AIT), but said that true progress hinges on properly taxing property and other untapped income streams. “We need a tax system that captures all forms of income. That’s the only way we reduce pressure on honest, salaried taxpayers,” he added.
Alongside him, Dr. Nadeem Javaid, Vice Chancellor of the Pakistan Institute of Development Economics (PIDE), raised eyebrows with a bold statement on public spending: “Around 40% of development spending is lost to commissions. Nothing gets approved without a 5–7% cut going to the AGPR [Accountant General Pakistan Revenues]. Everyone knows this.”
The need for transparency and systemic change echoed throughout the session. Dr. Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), highlighted the unnecessary complexity of Pakistan’s tax framework. “There are 88 withholding taxes, yet 45 of them don’t even bring in Rs1 billion annually. We need clarity and simplification,” he said.
The Federal Board of Revenue (FBR) currently collects Rs1.2 trillion annually just through withholding taxes—yet the system is still seen as inefficient and overly complex.
Panellists were unanimous on one point: digitisation is long overdue. Despite having the tools and technical capacity, Pakistan’s tax administration remains stuck in the past due to political resistance, outdated legal frameworks, lack of institutional coordination, and minimal motivation within tax authorities.
Experts agreed that a successful digital transformation would require end-to-end automation, real-time data integration, and strong administrative commitment. Until that happens, public trust in the tax system will continue to erode.
“Right now, the system punishes those who comply and rewards those who don’t,” one speaker said. “We need a tax code that’s simple, fair, and backed by technology—only then will people have the confidence to participate.”
From property taxation to digital reforms, the message was clear: Pakistan’s tax system needs a reset—not just for fairness, but for the country’s financial survival.
