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Business Recorder
5 days ago
- Business
- Business Recorder
World Bank for improving Pakistan's domestic revenue mobilisation, public expenditure efficiency
ISLAMABAD: The World Bank recommended Pakistan to improve domestic revenue mobilisation and public expenditure efficiency to generate greater fiscal space, which should be prioritised to expand social expenditure and targeted transfers and to improve fiscal equity. The bank in its report, 'The effects of taxes and transfers on inequality and poverty in Pakistan,' stated that as Pakistan has recently faced substantial fiscal challenges, natural disasters, and negative economic shocks (such as the Covid-19 pandemic), disparities in income, consumption, and access gaps to services are likely to have widened further for the poor and incidence analysis (FIA) for Pakistan for fiscal year 2019 summarised in the report is the first study that models the joint distributional impacts of the country's main taxes, social expenditures, and subsidy expenditures on households' welfare, the WB added. The bank stated that over the past two decades, Pakistan has struggled with low and increasingly volatile economic growth. National Targeting System being introduced to prevent sales tax evasion, PM told Although Pakistan lifted about 46 million people out of poverty between 2001 and 2018 and halved the headcount poverty ratio in that time span, rural poverty remains twice as high as poverty in urban areas. Nationwide, the top 10 percent of the population consume on average three times more than the bottom 10 percent, and their incomes are five times larger, with no substantial change over time. These inequalities in income and consumption translate into unequal access to human capital development services and unequal access to economic opportunities, which further limits intergenerational mobility. The report noted that the combination of taxes, social expenditures, and subsidies modeled increases the national poverty headcount while leaving inequality largely unchanged in fiscal year 2019. The Gini coefficient index of inequality is reduced slightly from 29 at prefiscal income to 28.6 at final income while the national poverty headcount increases from 23.3 percent at prefiscal income to 25.5 percent at consumable income. Further most poor and vulnerable households are net payers into the fiscal system meaning that benefits received are smaller in magnitude than taxes paid. Only individuals from the poorest ten percent of the population can expect to be net recipients – or can expect to receive more in benefits than they will pay in taxes – with a net cash gain estimated 1.2 percent of prefiscal income. All other individuals can expect to be net payers in cash terms, with cash losses ranging from -1.8 percent in decile 2 to -5.5 percent in decile 10 (the richest decile). That deciles 2 and 3 are net payers of the fiscal system is consistent with the increase in the poverty headcount ratio due to fiscal policy while the fact that the cash losses are greater in the richer deciles is consistent with the slight reduction in inequality due to fiscal policy. Further richer households capture a larger share of the subsidy and in-kind benefits available and pay more of total revenues collected from direct and indirect taxes. Estimating each decile's share of the total subsidy benefits available or the total revenue from indirect taxes provides a summary of how concentrated benefits or taxes are in one group. In Pakistan in fiscal year 2019, the two richest deciles capture 34 percent of total subsidy expenditure, 29 percent of in-kind education benefits, and 27 percent of in-kind health benefits, and pay 40 percent of total revenues from indirect taxes. The subsidy and in-kind benefit shares received by the two richest deciles are driven by the electricity subsidy, tertiary education, and inpatient health spending. The two richest deciles also pay just less than 90 percent of total direct taxes modeled while the two poorest deciles receive approximately 53 percent of the total direct transfer spending. The general sales tax (GST) has the largest negative impact on the poverty headcount; the Benazir Income Support Program (BISP) has the largest positive impact on inequality reduction. Estimations of the marginal contributions of individual fiscal instruments – or the additional impact that individual fiscal instruments have on poverty or inequality when all other fiscal instruments are included – demonstrate that GST has the largest marginal contribution to the national poverty increase. GST is allocated roughly in proportion to consumption expenditure and therefore is neither strongly regressive or strongly progressive; however, GST payments account for over seven percent of households' pretax expenditure which leads to further impoverishment among poor and vulnerable households. The BISP transfers and direct taxes are the most cost-effective fiscal policy tools for reducing inequality while protecting poor and vulnerable households; in contrast, indirect subsidies are relatively ineffective. The report noted that among comparator middle-income countries, Pakistan has the highest poverty increase and the lowest inequality reduction from the sample. This result can be explained by the fiscal facts in Pakistan, namely: (1) tax collections overall were relatively low at 13.4 percent of GDP, and (2) were generated in large part from impoverishing indirect taxes, while (3) the vast majority of domestic revenues and other sources of financing were dedicated to rigid expenditures like debt service, the government's wage bill (including pension payments). The bank stated that fiscal sustainability could go together with fiscal equity if additional revenues collected from GST harmonisation, for example, is used to compensate poor and vulnerable households through well-targeted cash transfers. Similarly, public expenditure efficiency reforms (for instance, moving from generalised ineffective subsidies in the energy sector to targeted social transfers) could improve fiscal sustainability along with fiscal equity. Further expenditure reforms to improve the accessibility and quality of public health and education services in Pakistan could have long-term impacts in terms of poverty and inequality reduction. Copyright Business Recorder, 2025
Business Recorder
5 days ago
- Business
- Business Recorder
World Bank for improving domestic revenue mobilisation, public expenditure efficiency
ISLAMABAD: The World Bank recommended Pakistan to improve domestic revenue mobilisation and public expenditure efficiency to generate greater fiscal space, which should be prioritised to expand social expenditure and targeted transfers and to improve fiscal equity. The bank in its report, 'The effects of taxes and transfers on inequality and poverty in Pakistan,' stated that as Pakistan has recently faced substantial fiscal challenges, natural disasters, and negative economic shocks (such as the Covid-19 pandemic), disparities in income, consumption, and access gaps to services are likely to have widened further for the poor and incidence analysis (FIA) for Pakistan for fiscal year 2019 summarised in the report is the first study that models the joint distributional impacts of the country's main taxes, social expenditures, and subsidy expenditures on households' welfare, the WB added. The bank stated that over the past two decades, Pakistan has struggled with low and increasingly volatile economic growth. National Targeting System being introduced to prevent sales tax evasion, PM told Although Pakistan lifted about 46 million people out of poverty between 2001 and 2018 and halved the headcount poverty ratio in that time span, rural poverty remains twice as high as poverty in urban areas. Nationwide, the top 10 percent of the population consume on average three times more than the bottom 10 percent, and their incomes are five times larger, with no substantial change over time. These inequalities in income and consumption translate into unequal access to human capital development services and unequal access to economic opportunities, which further limits intergenerational mobility. The report noted that the combination of taxes, social expenditures, and subsidies modeled increases the national poverty headcount while leaving inequality largely unchanged in fiscal year 2019. The Gini coefficient index of inequality is reduced slightly from 29 at prefiscal income to 28.6 at final income while the national poverty headcount increases from 23.3 percent at prefiscal income to 25.5 percent at consumable income. Further most poor and vulnerable households are net payers into the fiscal system meaning that benefits received are smaller in magnitude than taxes paid. Only individuals from the poorest ten percent of the population can expect to be net recipients – or can expect to receive more in benefits than they will pay in taxes – with a net cash gain estimated 1.2 percent of prefiscal income. All other individuals can expect to be net payers in cash terms, with cash losses ranging from -1.8 percent in decile 2 to -5.5 percent in decile 10 (the richest decile). That deciles 2 and 3 are net payers of the fiscal system is consistent with the increase in the poverty headcount ratio due to fiscal policy while the fact that the cash losses are greater in the richer deciles is consistent with the slight reduction in inequality due to fiscal policy. Further richer households capture a larger share of the subsidy and in-kind benefits available and pay more of total revenues collected from direct and indirect taxes. Estimating each decile's share of the total subsidy benefits available or the total revenue from indirect taxes provides a summary of how concentrated benefits or taxes are in one group. In Pakistan in fiscal year 2019, the two richest deciles capture 34 percent of total subsidy expenditure, 29 percent of in-kind education benefits, and 27 percent of in-kind health benefits, and pay 40 percent of total revenues from indirect taxes. The subsidy and in-kind benefit shares received by the two richest deciles are driven by the electricity subsidy, tertiary education, and inpatient health spending. The two richest deciles also pay just less than 90 percent of total direct taxes modeled while the two poorest deciles receive approximately 53 percent of the total direct transfer spending. The general sales tax (GST) has the largest negative impact on the poverty headcount; the Benazir Income Support Program (BISP) has the largest positive impact on inequality reduction. Estimations of the marginal contributions of individual fiscal instruments – or the additional impact that individual fiscal instruments have on poverty or inequality when all other fiscal instruments are included – demonstrate that GST has the largest marginal contribution to the national poverty increase. GST is allocated roughly in proportion to consumption expenditure and therefore is neither strongly regressive or strongly progressive; however, GST payments account for over seven percent of households' pretax expenditure which leads to further impoverishment among poor and vulnerable households. The BISP transfers and direct taxes are the most cost-effective fiscal policy tools for reducing inequality while protecting poor and vulnerable households; in contrast, indirect subsidies are relatively ineffective. The report noted that among comparator middle-income countries, Pakistan has the highest poverty increase and the lowest inequality reduction from the sample. This result can be explained by the fiscal facts in Pakistan, namely: (1) tax collections overall were relatively low at 13.4 percent of GDP, and (2) were generated in large part from impoverishing indirect taxes, while (3) the vast majority of domestic revenues and other sources of financing were dedicated to rigid expenditures like debt service, the government's wage bill (including pension payments). The bank stated that fiscal sustainability could go together with fiscal equity if additional revenues collected from GST harmonisation, for example, is used to compensate poor and vulnerable households through well-targeted cash transfers. Similarly, public expenditure efficiency reforms (for instance, moving from generalised ineffective subsidies in the energy sector to targeted social transfers) could improve fiscal sustainability along with fiscal equity. Further expenditure reforms to improve the accessibility and quality of public health and education services in Pakistan could have long-term impacts in terms of poverty and inequality reduction. Copyright Business Recorder, 2025
Scoop
22-05-2025
- Health
- Scoop
Feeling Hard Done By? New Study Looks At The Effects
Press Release – University of Auckland Drawing from data collected over nine years as part of the New Zealand Attitudes and Values Study (NZAVS), researchers examined responses from more than 50,000 New Zealanders to explore how perceptions of economic inequality affected emotional wellbeing … Are you feeling hard done by – frustrated at earning less than other people? In a recently published study, people feeling that way tended to develop a diminished sense of belonging and then to report poorer physical health. Drawing from data collected over nine years as part of the New Zealand Attitudes and Values Study (NZAVS), researchers examined responses from more than 50,000 New Zealanders to explore how perceptions of economic inequality affected emotional wellbeing and health. 'Our study suggests that if you are worse off financially compared to others, across time this is linked to reduced feelings of belonging, which may in turn negatively contribute to your physical health,' says Dr Brian Don, lead author of the study published in Affective Science. 'As a society, this shines a light on the toll that inequality can take.' Income inequality has been rising across the world and in New Zealand, says Don, a lecturer in the School of Psychology at Waipapa Taumata Rau, University of Auckland. In the study, people rated their levels of agreement with statements such as ' I'm frustrated by what I earn relative to other people in New Zealand ' and '(I) Know that people in my life accept and value me' and graded their health on a scale from poor to excellent. Participants who felt economically deprived one year were more likely to report lower levels of belonging the subsequent year, which predicted poorer physical health in the year following that. While financial hardship can limit participation in society, Don believes the decline in belonging may stem more from psychological mechanisms than direct economic constraints. How can these effects be avoided? At the societal level, Don says policies that reduce the rising pattern of economic inequality will help to reduce individual feelings of unfairness. There are things individuals can do, too. 'Comparison truly is the thief of joy,' says Don. 'At the individual level, avoiding social media could be a good start to avoid getting stuck in a rut of negative comparisons.' A caveat: the study shows associations, not causality. Besides a reduced sense of belonging, feeling worse off financially was linked with declines in gratitude and sense of meaning in life. Looking ahead, Don aims to explore whether objective measures of inequality, such as the Gini coefficient, influence emotional experiences and physiological responses in everyday life. The co-authors of the paper were Dr Kieren Lilly, Professor Chris Sibley, Professor Nickola Overall and Associate Professor Danny Osborne.
Scoop
22-05-2025
- Health
- Scoop
Feeling Hard Done By? New Study Looks At The Effects
Press Release – University of Auckland Drawing from data collected over nine years as part of the New Zealand Attitudes and Values Study (NZAVS), researchers examined responses from more than 50,000 New Zealanders to explore how perceptions of economic inequality affected emotional wellbeing … Are you feeling hard done by – frustrated at earning less than other people? In a recently published study, people feeling that way tended to develop a diminished sense of belonging and then to report poorer physical health. Drawing from data collected over nine years as part of the New Zealand Attitudes and Values Study (NZAVS), researchers examined responses from more than 50,000 New Zealanders to explore how perceptions of economic inequality affected emotional wellbeing and health. 'Our study suggests that if you are worse off financially compared to others, across time this is linked to reduced feelings of belonging, which may in turn negatively contribute to your physical health,' says Dr Brian Don, lead author of the study published in Affective Science. 'As a society, this shines a light on the toll that inequality can take.' Income inequality has been rising across the world and in New Zealand, says Don, a lecturer in the School of Psychology at Waipapa Taumata Rau, University of Auckland. In the study, people rated their levels of agreement with statements such as ' I'm frustrated by what I earn relative to other people in New Zealand ' and '(I) Know that people in my life accept and value me' and graded their health on a scale from poor to excellent. Participants who felt economically deprived one year were more likely to report lower levels of belonging the subsequent year, which predicted poorer physical health in the year following that. While financial hardship can limit participation in society, Don believes the decline in belonging may stem more from psychological mechanisms than direct economic constraints. How can these effects be avoided? At the societal level, Don says policies that reduce the rising pattern of economic inequality will help to reduce individual feelings of unfairness. There are things individuals can do, too. 'Comparison truly is the thief of joy,' says Don. 'At the individual level, avoiding social media could be a good start to avoid getting stuck in a rut of negative comparisons.' A caveat: the study shows associations, not causality. Besides a reduced sense of belonging, feeling worse off financially was linked with declines in gratitude and sense of meaning in life. Looking ahead, Don aims to explore whether objective measures of inequality, such as the Gini coefficient, influence emotional experiences and physiological responses in everyday life. The co-authors of the paper were Dr Kieren Lilly, Professor Chris Sibley, Professor Nickola Overall and Associate Professor Danny Osborne.
Scoop
22-05-2025
- Health
- Scoop
Feeling Hard Done By? New Study Looks At The Effects
Are you feeling hard done by – frustrated at earning less than other people? In a recently published study, people feeling that way tended to develop a diminished sense of belonging and then to report poorer physical health. Drawing from data collected over nine years as part of the New Zealand Attitudes and Values Study (NZAVS), researchers examined responses from more than 50,000 New Zealanders to explore how perceptions of economic inequality affected emotional wellbeing and health. 'Our study suggests that if you are worse off financially compared to others, across time this is linked to reduced feelings of belonging, which may in turn negatively contribute to your physical health,' says Dr Brian Don, lead author of the study published in Affective Science. 'As a society, this shines a light on the toll that inequality can take.' Income inequality has been rising across the world and in New Zealand, says Don, a lecturer in the School of Psychology at Waipapa Taumata Rau, University of Auckland. In the study, people rated their levels of agreement with statements such as ' I'm frustrated by what I earn relative to other people in New Zealand ' and '(I) Know that people in my life accept and value me' and graded their health on a scale from poor to excellent. Participants who felt economically deprived one year were more likely to report lower levels of belonging the subsequent year, which predicted poorer physical health in the year following that. While financial hardship can limit participation in society, Don believes the decline in belonging may stem more from psychological mechanisms than direct economic constraints. How can these effects be avoided? At the societal level, Don says policies that reduce the rising pattern of economic inequality will help to reduce individual feelings of unfairness. There are things individuals can do, too. 'Comparison truly is the thief of joy,' says Don. 'At the individual level, avoiding social media could be a good start to avoid getting stuck in a rut of negative comparisons.' A caveat: the study shows associations, not causality. Besides a reduced sense of belonging, feeling worse off financially was linked with declines in gratitude and sense of meaning in life. Looking ahead, Don aims to explore whether objective measures of inequality, such as the Gini coefficient, influence emotional experiences and physiological responses in everyday life. The co-authors of the paper were Dr Kieren Lilly, Professor Chris Sibley, Professor Nickola Overall and Associate Professor Danny Osborne.
