EXPRESS NEWS URDU E-PAPER ENGLISH E-PAPER SINDHI E-PAPER CRICKET PAKISTAN EXPRESS LIVE CAMPUS GURU EXPRESS

CAMPUS GURU EXPRESS ENTERTAINMENT FOOD TRIBUNE

  

TODAY'S PAPER | JANUARY 28, 2024 | ADVERTISE

HOME LATEST PAKISTAN BUSINESS WORLD OPINION SCI-TECH LIFE & STYLE T-MAGAZINE T.EDIT SPORTS BLOGS VIDEOS SLIDESHOW ARCHIVE OTHER PODCAST WEBINAR

95m Pakistanis live in poverty: World Bank

Urges govt to tax agriculture, real estate, cut wasteful expenditure Join Us

Shahbaz Rana September 23, 2023     

World Bank. PHOTO: FILE

ISLAMABAD: Deeply concerned over the state of economy, the

World Bank has urged Pakistan to take urgent steps to tax its
sacred cows – agriculture and real estate – and cut wasteful
expenditures in an effort to achieve economic stability through
steep fiscal adjustment of over 7% of the size of the economy.

The lender on Friday also revealed that poverty in Pakistan shot up to 39.4%
as of last fiscal year with 12.5 million more people falling into the trap due to
poor economic conditions. About 95 million Pakistanis now live in poverty.

The Washington-based lender unveiled the draft policy notes that it prepared
with the help of all stakeholders for the next government.

The lender identified low human development, unsustainable fiscal situation,

over-regulated private sector, agriculture and energy sectors as the priority
areas for reforms for the next government.

It proposed measures – immediately increase the tax-to-GDP ratio by 5% and

cut expenditures by about 2.7% of GDP – aimed at putting the unsustainable
economy back on a prudent fiscal path.

However, the measures suggested were mostly in areas that had been
considered as “sacred cows”.

“The World Bank is deeply concerned about the economic situation of today,”
Tobias Haque, the WB’s lead country economist, said.
Pakistan is facing serious economic and human development crises and it is at
a point where major policy shifts are required, he added.

The bank’s note on strengthening government revenues showed a host of

measures to improve the revenue-to-GDP ratio by 5% through withdrawal of
tax exemptions and increasing burden of taxes on the real estate and the
agriculture sectors.

“This may be Pakistan’s moment for significant policy shift,” Najy Benhassine,
the country director for Pakistan at WB, said.

To a question, he said: “We hope there is a realisation of the current economic

situation but the question is whether the realisation for the change in policies
is across all the political parties, businesses, civil society and all those who
count.”

The poverty in Pakistan increased within one year from 34.2% to 39.4% with
12.5 million more people falling below the poverty line of $3.65 per day
income level, according to the WB.

It added that the increase in poverty was consistent with ground realities.

“Pakistan’s economic model is no longer reducing poverty and the living

standards have fallen behind peer countries,” Haque said.

Revenues

Pakistan has the capacity to collect taxes equal to 22% of the GDP but its
current ratio is only 10.2% – showing a gap of more than half, according to the
WB note.

The lender proposed reducing distortive exemptions to generate taxes equal to

2% of the GDP. It wanted an increase in taxes on land and property to collect
another 2% of GDP in revenues and generate another 1% of the GDP from the
agriculture sector.

The lender proposed a mandatory use of CNIC for transactions, particularly of

assets.

The WB recommended withdrawing income tax exemption available to the

power generation projects and to the real estate investment trusts.

“The revenues generated by withdrawing these exemptions are enough to fund

35,000 teachers’ salaries,” it added.

The WB recommended further tightening the noose around salaried

individuals by reducing the numbers of tax slabs and further reducing the
income threshold for the top marginal tax brackets.

It proposed increasing excise duties on cigarettes by applying a uniform rate

across all brands and an automatic inflation-adjusted increase in these rates
every year.

It also wanted withdrawal of tax exemptions on machinery import for power

generation and transmission, and withdrawal of exemptions for
pharmaceutical and energy sectors.
It also proposed withdrawing exemptions for food items – oil, pulses, animal,
fruit and dairy.

The WB proposed to lower the income tax free slab for the agriculture sector
from the existing 12.5 acres and through proper categorisation of land aimed
at generating taxes equal to 1% of the GDP.

The farmers with land of less than 12.5 acres did not pay any tax, while those
who owned up to 25 acres paid just Rs100 per acre. The ones owning from 26
to 50 acres land paid only Rs250 per tax and the rate for above 50 acres was
 mere Rs300 per acre.

To collect 2% of the GDP taxes from land and real estate, the WB proposed
harmonisation of three different valuation systems, increase in property tax
rates and change in land classification for taxation purposes.

At the moment, there is actual market price of a plot, then a deputy collector
valuation to pay provincial tax and then FBR valuation to pay federal taxes.

Expenditure cut

The lender proposed reducing energy and commodity subsidies, implementing

a single treasury account, and imposing temporary austerity measures in the
short-term for saving about 1% of the GDP equivalent expenditures.

In 2022, the federal government’s deposits in commercial banks amounted to

over Rs2 trillion and due to the government’s sovereign borrowings in absence
of use of this idle cash, an amount of Rs424 billion was paid in interest, the
WB said.

For the medium-term, the WB proposed reducing federal development and

current expenditures on provincial nature projects, reducing spending on loss
making entities, and improving quality of development spending to save about
Rs1.4 trillion. The cumulative impact of these short- to medium-term savings
is 2.7% of the GDP.

Pakistan is heavily subsidising the agriculture sector, which is leading to low

productivity.
The government can reduce Rs328 billion spending by winding up ministries
that fall in the provincial domain, it added.

Another Rs70 billion can be saved by devolving the Higher Education

Commission to the provinces and Rs217 billion savings can be ensured
through cost sharing of BISP with the provinces, the WB said.

“There is a lot of stop and go and a lot of policy reversals, which often are
correlated with the political cycles,” Benhassine said.

He said that the donors could only provide advice and financing and the
solution would have to come from inside Pakistan.

“Pakistan needs to address the human capital crisis and there is a need to
recognise the scale of the problem,” Haque said.

There is a need for reduction in energy subsidies. High energy prices are
putting heavy pressures on the households and there is a need to address the
issues of higher losses by the power distribution companies, changing the
energy generation mix.

“We hope this programme of discussions will help build a consensus around a
path towards inclusive, sustainable, and climate-resilient development,”
Benhassine said.

 

COMMENTS

Name (required)

Email (required)

Write your comment here

 Post comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ

THE EXPRESS TRIBUNE   YouTube 84K

Hamas Extends Olive Branch: Commits Cross-Border Tensions Escalate: Maryam Nawaz Emphasizes Vote Legal Drama Unfolds: Imran
to Ceasefire Following International Pakistan Accuses India of Orchestrating Respect for Pakistan's Democratic Qureshi Set for Indictment in
Court of Justice Order Assassinations! Institutions in Election Rally Cases

LATEST

Dozens arrested as PTI holds rallies in various cities on Imran’s call

Nawaz says ready to face same hardships as nation

PTI unveils election manifesto promising constitutional reforms

PTI's Hammad Azhar says father arrested for organising election rally

Shunned in computer age, cursive makes a comeback in California

Ukraine says it uncovers mass fraud in weapons procurement

T.EDIT

Skincare 101: Common Mistakes You’re Making in Your Skincare Routine

Style 101: MIRI by Sabbiha Mnasoor

The Travel Edit

ON EXPRESS URDU

‫خیبر پختونخوا میں موسم سرما کی پہلی برف باری‬

‫کراچی میں کل شام یا منگل کی صبح بارش کا امکان‬

‫حماد اظہر کے والد سابق گورنر پنجاب میاں اظہر الہور سے گرفتار‬

‫شیخوپورہ‪ :‬گھر میں فائرنگ سے خاندان کے ‪ 4‬افراد قتل‬

‫بالول بھٹو لیاری سے الیکشن لڑنے کے بھی قابل نہیں‪ ،‬حافظ نعیم‬

‫پی ٹی ٓائی کیخالف کریک ڈاؤن؛ انتخابی نشان والے کھلونوں اور ماڈلز کی فروخت میں کمی‬

‫‪MOST READ‬‬

‫‪PDMA forecasts rain in Punjab‬‬

‫‪Sania Mirza breaks social media silence after Shoaib Malik, Sana Javed's marriage‬‬

‫‪Nine Pakistanis killed in Iran ambush‬‬

‫‪Video of Rahat Fateh Ali Khan assaulting employee goes viral‬‬

Ayushmann Khurrana faces backlash for singing ‘Dil Dil Pakistan’ in resurfaced video

Independents heat up NA-55 race

OPINION

The permanence of change

Humans’ standing on two feet and the story it tells

Hegemonic political culture — not what Pakistan needs

Anti-writing: writing sans communication

Words versus deeds

What next — a directional query

Pakistan Life & Style Prayer Timing Pakistan About Us Style Guide FOLLOW US
Business T.Edit Weather Forecast Pakistan Online Advertising Privacy Policy
World Sports RSS Feeds Copyright
Opinion Blog Subscribe to the Paper Code of ethics
Videos Contact Us Mobile App
Careers

This material may not be published, broadcast, rewritten, redistributed or derived from. Unless
otherwise stated, all content is copyrighted © 2024 The Express Tribune.