The World Bank has urged Pakistan to adopt a national fiscal policy aligning federal and provincial spending with constitutional mandates, merge various revenue agencies into a single GST collection entity, and effectively tax agriculture, capital gains, and real estate in the upcoming fiscal year.
The bank’s latest policy advice emphasizes implementing the new Fiscal Responsibility and Debt Limitation Acts at both federal and provincial levels, including the development of a national medium-term fiscal framework. This advice is expected to become part of discussions for the next International Monetary Fund program.
Key recommendations include harmonizing GST across the federation and its units, consolidating GST collection under a single agency, and mobilizing revenues from underutilized sources such as urban immovable property tax, agricultural income tax, and capital gains taxes.
Efforts to increase the tax-to-GDP ratio to 15% in five years, as agreed upon in the 7th National Finance Commission (NFC) award, are highlighted. This includes streamlining tax collection systems, taxing agriculture and real estate sectors effectively, and updating valuation tables for urban immovable property tax.
The World Bank also suggests broader revenue reforms to expand the tax base, improve progressivity, and ease compliance. This involves closing corporate and sales tax exemptions, simplifying the tax structure, and reforming the personal income tax system for greater equity.
Additionally, the Planning Commission has developed a national planning framework focusing on ending provincial projects from the federal budget and enhancing resource deployment through federal-provincial synergy, aligned with the constitutional scheme and the spirit of the 7th NFC award and 18th constitutional amendment.
The framework aims to guide federal and provincial governments in achieving balanced development and regional equity, emphasizing shared responsibility and common objectives for development and growth.
