Agri, property taxes top priority.

ISLAMABAD -- The World Bank on Monday termed increase in taxes on the wealthier agriculture and property sectors its highest priority and said salaried persons were already paying taxes closer to their maximum potential.

The highest priority areas for increasing tax collection were the agriculture and property sectors where there was a lot of wealth, said Tobias Haque, lead economist of the World Bank for Pakistan.

Haque spoke to a group of people along with the lender's Pakistan chapter head Najy Benhassine.

The World Bank termed withdrawing tax exemptions, mainly in the sales tax area, part of its top priorities.

Pakistan could generate revenues equal to 3% of gross domestic product (GDP) by tapping the full potential of agriculture and property sectors, said the lead economist.

At this year's projected GDP size, Pakistan can generate over Rs3 trillion by just plugging loopholes in the agriculture and property sectors.

The World Bank's estimates suggest that by increasing taxes on land and property Pakistan can collect 2% of GDP in revenue and another 1% from the agriculture sector. Tobias said that it was the responsibility of provincial governments to tax land and agriculture income.

Last month, in its policy notes for Pakistan, the World Bank proposed measures for immediately increasing the tax-to-GDP ratio by 5% and cutting expenditures by about 2.7% of GDP aimed at putting the unsustainable economy back on a prudent fiscal path.

To collect 2% of GDP in taxes from land and real estate, the bank has proposed harmonisation of three different valuation systems, increase in property tax rates and change in land classification for taxation purposes.

At present, there is an actual market price of a plot, then a deputy collector valuation to pay provincial tax and then the FBR valuation to pay federal taxes.

Pakistan's tax system is designed for revenue extraction, not for revenue mobilisation, said Sajid Amin, an economist working with the Sustainable Development Policy Institute (SDPI).

Pakistan was in a very difficult situation and it had to go for fiscal consolidation through a combination of revenue measures and expenditure rationalisation, said Tobias.

All Pakistanis were paying for fiscal deficit through inflation, said Tobias, while speaking at a policy dialogue arranged by Tabadlab, a policy think tank.

The lender has proposed reducing distortive exemptions to generate taxes equal to 2% of GDP.

'Personal income tax reforms are not...