The World Bank has retracted its previous suggestion to tax individuals earning below Rs50,000, clarifying that the recommendation was based on outdated 2019 data. This clarification arises amidst data from the Federal Board of Revenue (FBR) indicating the salaried class has recently outpaced exporters and the real-estate sector in tax contributions.
The global financial institution emphasized no intent to lower the current nominal threshold. They acknowledged that using the 2019 data might have been misleading, especially considering the current inflation rates and labour market conditions. The World Bank asserted the need to safeguard the interests of low-income groups.
They clarified, “Previous findings pointed towards a potential reform in the income tax structure with a lower exemption for salaried individuals. However, this needs re-evaluation considering recent economic conditions to ensure low incomes remain unaffected.”
The World Bank expressed that their Pakistan Development Update (PDU) recommendation should have been more explicit about the necessity for analysis based on updated data. The institution continues to endorse comprehensive tax reforms targeting a more progressive system that places a greater tax obligation on affluent individuals. These proposed reforms encompass reducing subsidies, removing regressive tax exemptions, and enhancing taxation of high earners, along with improvements in the agriculture, property, and retail sectors’ taxation.
This initial suggestion caused anxiety among salaried individuals earning Rs50,000 or below, who are presently exempt from direct taxation given the soaring inflation and living costs.