The World Bank has retracted its recommendation to impose taxes on individuals earning less than Rs50,000, clarifying that the suggestion was based on 2019 data.
The move comes as the salaried class has reportedly outperformed exporters and the real-estate sector in tax contributions over the last three months, according to Federal Board of Revenue (FBR) sources.
The World Bank spokesperson 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 global lender cited the need to update its recommendation in light of recent inflation and labor market conditions to safeguard low-income groups.
The World Bank's previous analysis, which used 2019 data, proposed a lower exemption threshold for salaried individuals as part of a reformed income tax structure. However, the bank emphasized the necessity of revising this analysis with more recent data to ensure that low incomes are not adversely affected.
The Washington-based institution recommended comprehensive tax reforms to make the overall system more progressive and to increase the tax burden on wealthy individuals. These reforms include reducing subsidies, eliminating regressive tax exemptions, and enhancing taxation on high-income earners. Additionally, the World Bank suggested improvements in the taxation of agriculture, property, and the retail sector.
The World Bank clarified that any adjustments to tax thresholds should be based on new survey data and designed to protect low incomes. The initial suggestion to tax individuals earning less than Rs50,000 had raised concerns among the salaried class, as they are already grappling with soaring inflation and the rising cost of living.
