In recent news, the World Bank has retracted its statement regarding taxing individuals earning less than Rs. 50,000 a month in Pakistan. According to a report in Tribune, fresh data reveals that the salaried class in Pakistan has paid more taxes in the last three months than the combined taxes paid by the country’s wealthiest exporters and the real estate sector. In this article, we will delve into the details of this significant development and its implications.
A Shift in Tax Contributions
The salaried individuals in Pakistan have paid a staggering Rs. 71 billion in taxes during the specified period. This amount is Rs. 6 billion higher than the total taxes paid by the exporters and the real estate sector. This surprising revelation comes despite the considerably higher income generated by the exporters and the real estate sector.
The World Bank’s Clarification
The World Bank has issued a clarification statement, admitting that its earlier suggestion of imposing taxes on those earning less than Rs. 50,000 a month was based on data from 2019, which now requires updating. A spokesperson for the World Bank stated, “The World Bank certainly does not recommend any reduction in the current nominal threshold, and how it was framed above may have indeed been misleading.”
The Need for Updated Analysis
The spokesperson further explained, “Previous analysis included in the Public Expenditure Review using 2019 data suggested that a reformed income tax structure could include a lower exemption threshold for salaried individuals. However, this analysis would need to be updated to take account of recent inflation and labor market changes to ensure that low incomes are not adversely affected.”
Acknowledging Mistakes
In an admirable display of accountability, the World Bank acknowledged its mistakes and stated that “the recommendation in the Pakistan Development Update should have been clearer on the need for new analysis based on more recent data to inform this reform.” It emphasized that any changes to tax thresholds should be assessed meticulously, considering new survey data, and should be designed to protect low incomes.
