World Bank Urges Pakistan to Reform Tax System, Expand Tax Base

Islamabad: The World Bank has called for major improvements in Pakistan’s tax system and a broadening of the tax base, emphasizing the need for stronger revenue generation mechanisms as part of wider development reforms in South Asia.
In its latest report on South Asia’s development outlook, the World Bank stressed that Pakistan must strengthen tax administration and expand its tax base, while also recommending pollution discouragement measures as a revenue tool to support sustainable development.
The report highlighted Pakistan as one of the world’s most water-scarce countries, noting that inefficient irrigation systems and outdated agricultural practices are causing significant water losses. It pointed to modern irrigation projects in Punjab that achieved up to 57 percent water savings, while advanced agricultural initiatives led to crop productivity increases ranging from 14 to 31 percent.
The World Bank further warned that groundwater levels across South Asia are declining rapidly. It noted that Pakistan is linking electricity and gas subsidies with the Benazir Income Support Programme (BISP), adding that subsidy reforms could reduce misallocation, fiscal losses, and the country’s growing circular debt. The report suggested that fuel subsidies could instead be redirected toward social protection programmes.
According to the World Bank, a Climate Risk Facility is being established to support small businesses affected by floods, while BISP is being strengthened through digital systems to improve efficiency and transparency.
The report also noted that during the COVID-19 pandemic, financial assistance was provided to 12 million families through BISP, adding that self-registration mechanisms for aid are available in both Pakistan and the Maldives.