World Bank recommends Pakistan consolidated GST regime
The World Bank is advocating for Pakistan to merge its federal and provincial revenue agencies into a unified General Sales Tax (GST) collection entity, as recommended by the World Bank. However, this entails significant legislative hurdles and potential discontent among provinces, given their current efficient tax collection systems, particularly in services. It suggests reallocating land revenue and agricultural taxes to provinces and consolidating excise duties and motor vehicle taxes under the sales tax agency.
The Bank’s criticism is directed towards Pakistan’s reliance on borrowing due to the National Finance Commission (NFC) award’s impact, which increased provincial shares and strained federal budgets. The editorial stresses fiscal discipline and urges the implementation of devolution to alleviate federal financial pressures. The Federal Board of Revenue (FBR) faces scrutiny for revenue leakage and a focus on tax hikes rather than structural reforms. It calls for fair tax structures and public involvement in reform processes. Additionally, it questions the alignment of the World Bank’s proposals with Pakistan’s constitution and the FBR’s capacity.
Comparatively, the Indian GST system presents a contrasting scenario. While both countries face challenges in tax administration, India’s GST regime underwent extensive planning and consultation, leading to a unified tax system. However, implementation hurdles persist, including technological issues and compliance challenges, underscoring the complexities of tax reforms in both countries.
