ISLAMABAD: Pakistan and the World Bank signed on Tuesday a US$918 million loan agreement to support the economy, reform the tax system and broaden the revenue base.
Low rates of tax collection have long been one of the biggest obstacles to economic development in Pakistan, which has a large informal economy and a fast-expanding population of 208 million people. Only 1.8 million people file income tax returns, report agencies.Under one of three separate programmes, the World Bank will lend Pakistan US$400 million to contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance, the finance ministry said.
The programme's targets include increasing the tax to gross domestic product ratio to 17 per cent, raising the number of active taxpayers to 3.5 million, reducing the compliance burden of paying taxes and improving the efficiency of customs controls.
Another US$400 million will go to higher education to support research in strategic sectors of the economy, the ministry said in a statement.
The remaining US$118 million would be spent on revenue mobilisation and resource management in north-western Khyber Pakhtunkhwa province, it said.
"These three projects represents future areas where Pakistan is investing in its people," the World Bank's country director, Patchamuthu Illangovan, said after signing the agreements.