The World Bank has issued a scathing critique of Pakistan’s tax framework, describing it as “unfair and absurd” while calling on the government to expand the tax base by properly documenting and taxing property and other untaxed income sources.

Speaking at the Pakistan Institute of Development Economics (PIDE) conference titled “Charting Pakistan’s Fiscal Trajectory: Enhancing Transparency & Trust,” World Bank Lead Country Economist Tobias Haque emphasized that the excessive tax burden on the salaried class can only be reduced through comprehensive reform and inclusion of all income streams in the tax net.

Haque highlighted the unsustainable nature of Pakistan’s current tax system, pointing to the country’s heavy reliance on the regressive General Sales Tax (GST) and the fact that only five million active tax filers exist in a nation of 240 million people. He stressed the critical importance of digitization and systemic reform to improve transparency and reduce inequity in tax collection.

PIDE Vice Chancellor Dr. Nadeem Javaid revealed alarming inefficiencies in public spending, stating that up to 40 percent of Pakistan’s development expenditure is lost to commissions. This significant leakage undermines the effectiveness of government programs and further strains the country’s fiscal position.

Dr. Ali Salman, Executive Director at PRIME Institute, criticized the complexity of the current withholding tax regime. He noted that 45 out of 88 withholding taxes each generate less than Rs. 1 billion annually, yet the Federal Board of Revenue (FBR) collects a total of Rs. 1.2 trillion from withholding taxes alone. Dr. Salman advocated for a major simplification of the tax code to improve efficiency and compliance.

Conference participants warned that the current tax structure is eroding public trust due to inconsistent policies and a lack of transparency. They called for simplified tax codes, updated labor laws, and performance-based incentives to rebuild confidence in the tax system.