Islamabad, Pakistan — The World Bank has called for urgent reforms to Pakistan’s taxation system, branding it “unfair” and disproportionately burdensome on the salaried class. At the heart of its recommendations is the inclusion of the under-taxed property sector into the formal tax net and the need to expand the revenue base to secure long-term economic stability.
The call came during a high-level session titled “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust”, held as part of a recent conference organized by the Pakistan Institute of Development Economics (PIDE) in Islamabad.
Tobias Haque, the World Bank’s Lead Country Economist for Pakistan, highlighted structural weaknesses in the country’s tax system. With only five million out of 240 million citizens filing tax returns, Pakistan continues to rely heavily on regressive instruments such as the General Sales Tax (GST) to generate revenue.
“It’s absurd that in a country of this size, so few people contribute directly through income tax,” said Haque, underscoring the need for wider documentation and a fairer distribution of the tax burden. He particularly criticized the long-standing exemption of the property sector, which remains largely untaxed despite being a major source of wealth for many Pakistanis.
Haque also cautioned against Pakistan’s current tariff structures, noting that while they may provide short-term revenue relief, they damage long-term fiscal sustainability and hinder competitiveness in trade and industry.
During the same session, Dr. Nadeem Javaid, Vice Chancellor of PIDE, revealed troubling statistics regarding Pakistan’s public expenditure. According to Dr. Javaid, nearly 40% of development funds are lost due to commissions and irregular practices. “No financial bill clears without 5% to 7% commissions — it’s an open secret,” he stated, shedding light on deep-rooted inefficiencies and corruption in fiscal governance.
Adding to the discourse, Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), emphasized the need to streamline the complex and fragmented withholding tax system. Pakistan currently has 88 different types of withholding taxes, of which 45 generate less than Rs1 billion each annually. Yet, the Federal Board of Revenue (FBR) collects approximately Rs1.2 trillion through these mechanisms.
Panelists were unanimous in their belief that digitising Pakistan’s tax infrastructure is essential for transparency and efficiency. However, political resistance, outdated legal frameworks, and poor institutional coordination continue to obstruct progress. Recommendations included full-scale digitisation, real-time data integration, automated processes, and modernization of labour and tax laws to bring Pakistan’s fiscal administration into the digital age.
Participants also raised concerns over growing public distrust in the tax system. The burden falls unfairly on compliant taxpayers, while major sectors remain either untaxed or under-taxed. To rebuild trust, experts called for transparent, simplified tax rules and a more equitable enforcement approach.
The session concluded with a clear message: Pakistan’s economic sustainability depends on bold reforms. Without widening the revenue base, addressing corruption in development spending, and embracing digital tax administration, the country’s fiscal future remains uncertain.