Islamabad: A report from the World Bank reveals that out of the 114 million employed individuals in Pakistan, only 8 million are registered for income tax.
According to the details in the report, the World Bank has published findings on tax reforms, suggesting that implementing income tax reforms could increase the tax contribution to the economy by 2% from direct income and 1% from agricultural income.
The report states that there are 114 million employed individuals in Pakistan, with only 8 million registered for income tax. Direct taxes contribute only 33% to tax revenue, with a larger portion of tax revenue coming from indirect taxes.
The World Bank noted that the lower tax rates for real estate have led to increased investment in the sector, while capital investment is relatively low in the manufacturing sector due to higher taxes.
According to the report, tax rates on land in Pakistan are low, and vacant plots in cities are more attractive for investment. The World Bank also highlighted that 90% of farmers in Pakistan do not pay taxes, and agricultural land is often used for purposes other than farming, contributing to income.
The tax system in Pakistan has been complex, and the lack of clarity in tax matters between federal and provincial levels, along with overlapping responsibilities, has affected tax collection.