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Business Recorder
26-05-2025
- Business
- Business Recorder
Taxation system needs fundamental reform
EDITORIAL: Reportedly, the World Bank (WB) deferred the approval of additional International Development Association (IDA) credit equivalent to $70 million for the Pakistan Raises Revenue (PRR) project. It is concerning that official documents reveal Pakistan's tax system raises little revenue, creates economic distortions, and imposes a disproportionate burden on the poor — largely due to systemic inefficiencies. Alarmingly, the World Bank's analysis shows that Pakistan's fiscal policies have a more pronounced effect on increasing poverty and a weaker impact on reducing inequality compared to other lower-middle-income countries. The WB analysis reflects ground realities. Pakistan's taxation system is heavily skewed towards indirect taxes, while even a significant portion of direct taxes is collected through indirect mechanisms. The result is: even the direct taxes levied in this manner get priced in similar to indirect prices that are passed on and exacerbate the burden of high rates of indirect taxes on the people with disproportionately higher onus on the poor, while the wealthy remain immensely undertaxed. A major share of taxes is collected at the import stage — on average, around 60 percent of GST during FY19–FY24. Additionally, a sizable portion of direct taxes is collected at the import stage. Compliant businesses adjust this against their income tax liabilities, but informal players simply pass the cost on to consumers. Even within the domestic supply chain, taxes intended to target traders and retailers are eventually transferred to the end consumer. These tax inefficiencies are embedded in domestic goods, making them more expensive and reducing the competitiveness of local firms. This is a key reason why Pakistan's exports have failed to diversify beyond traditional sectors. Large exporters with access to FBR (Federal Board of Revenue) officials and the PMO (Prime Minister's Office) get their tax refunds, while smaller or newer players struggle to achieve the same. You cannot export inefficiencies — this is why exports have stagnated, while distortions remain priced into domestic goods and services. The lower the income, the higher the burden — especially when essentials like milk are taxed at one of the highest GST rates in the world. The government has also imposed Super Tax on corporates, which in some cases — particularly in relation to FMCGs — has been passed on to consumers. This is evident from the fact that net margins for these companies have remained stable, while gross margins have increased. Higher income taxes are, in effect, also being passed on through price hikes. Higher taxation partly explains the unprecedented inflation witnessed over the past couple of years. This has pushed poverty levels up — now estimated at a staggering 44 percent. The poor are being strangled while the middle class is sliding into poverty. Meanwhile, the wealthy continue to enjoy rising incomes and pay a far smaller share of taxes leading to widening of the already yawning inequality. Another structural issue is tariff protection, which allows big businesses to protect their margins while raising prices for consumers — placing a heavier burden on low-income segments. Under the current tax structure, achieving productive growth and export expansion is nearly impossible. The system needs fundamental reform. All income — regardless of source — should be treated equally in both letter and spirit. Reliance on indirect taxes must be reduced. Corporate income tax rates should be lowered, and, most importantly, GST rate should be slashed. However, these goals remain pipe dreams without political will and enforcement. There must be a starting point. The government should capitalise on falling inflation, subdued global commodity prices, and improving economic sentiment to initiate long-overdue tax reforms in the FY26 budget. Copyright Business Recorder, 2025
Business Recorder
21-05-2025
- Business
- Business Recorder
World Bank defers additional $70m IDA credit to Pakistan Raises Revenue
ISLAMABAD: The World Bank (WB) has deferred the approval of additional International Development Association (IDA) credit in the equivalent amount of $70 million to Pakistan Raises Revenue (PRR) project, which was aimed at providing additional investment financing to the Federal Board of Revenue (FBR), in support of its new Transformation Plan, official sources revealed to Business Recorder. The World Bank's Board of Executive Directors was scheduled to consider the additional credit of $70 million for the PRR project on Wednesdays (May 21, 2025); however, sources have confirmed that the Pakistani authorities and the bank would hold further negotiations next week. The board is now likely to consider the agenda in June 2025. Official documents revealed the tax system raises little revenue, generates economic distortions, and imposes a high burden on the poor largely due to the revenue system. Recent analysis shows that Pakistan's fiscal policies have a more pronounced impact on increasing poverty and a less significant effect on reducing inequality than average for lower-middle-income countries. World Bank likely to approve additional IDA credit to PRR The additional financing (AF) incorporates a Level 2 Restructuring to introduce new activities and change some activities under the existing investment financing component. It also updates the results framework to reflect revised outputs linked with the investment financing component, and extends the project end date to June 30, 2027. With this AF, the total project amount will increase to $470 million. Project outcomes contribute directly to Outcome 5 of the CPF – More Public Resources for Inclusive Development. By increasing FBR collections to 10 per cent of GDP in fiscal year 2027, the project aligns with CPF outcome indicator 5.1, which aims to raise the tax-to-GDP ratio to 15 per cent by 2035. Enhanced revenue collection will enable Pakistan to increase spending on essential services over time, meeting fiscal financing needs without generating excessive fiscal imbalances in the future. Beyond the CPF's outcomes and targets, the project also indirectly contributes to World Bank Group (WBG) Scorecard indicators related to improved access to services, better debt sustainability, and increased private investment. PRR is an Investment Project Financing (IPF) with an original allocation of $400 million, with a results-based component and an investment financing component. The results-based component ($320 million or Component 1) disburses against documented execution of eligible expenditures under the Eligible Expenditure Programs and the achievement of the Disbursement Linked Indicator (DLI) targets. These DLIs are linked with four objective areas: (i) simple and transparent tax system; (ii) effective control of taxpayers' obligation; (iii) facilitation of compliance; and (iv) institutional development for efficiency and accountability. The investment financing component (original allocation of $80 million, Component 2) mainly focuses on investment in the FBR's information and communications technology (ICT) systems, including ICT equipment, software and business process improvement, cargo weighing, contact-less scanning, and laboratory equipment for customs inspections (goods). It also finances consulting and non-consulting services for software development, technical assistance (TA), and training. AF activities will be conducted within the geographical scope of the existing project. The proposed restructuring responds to the request of the Government of Pakistan to scale up project activities under Component 2 to meet the FBR's emerging priorities, and to extend the duration of the Project. The proposed Level 2 restructuring supports: (i) AF of $70 million for new activities under the investment financing component; (ii) extension in the duration of the project by 24 months (until June 30, 2027); and (iii) an update of the results framework to reflect revised outputs linked with the investment financing component (change of previously approved activities), as well as align with the extended project duration until June 30, 2027. With this AF, the total Project amount will increase to $470million. Copyright Business Recorder, 2025
Business Recorder
21-05-2025
- Business
- Business Recorder
World Bank defers additional $70m IDA credit to PRR
ISLAMABAD: The World Bank (WB) has deferred the approval of additional International Development Association (IDA) credit in the equivalent amount of $70 million to Pakistan Raises Revenue (PRR) project, which was aimed at providing additional investment financing to the Federal Board of Revenue (FBR), in support of its new Transformation Plan, official sources revealed to Business Recorder. The World Bank's Board of Executive Directors was scheduled to consider the additional credit of $70 million for the PRR project on Wednesdays (May 21, 2025); however, sources have confirmed that the Pakistani authorities and the bank would hold further negotiations next week. The board is now likely to consider the agenda in June 2025. Official documents revealed the tax system raises little revenue, generates economic distortions, and imposes a high burden on the poor largely due to the revenue system. Recent analysis shows that Pakistan's fiscal policies have a more pronounced impact on increasing poverty and a less significant effect on reducing inequality than average for lower-middle-income countries. World Bank likely to approve additional IDA credit to PRR The additional financing (AF) incorporates a Level 2 Restructuring to introduce new activities and change some activities under the existing investment financing component. It also updates the results framework to reflect revised outputs linked with the investment financing component, and extends the project end date to June 30, 2027. With this AF, the total project amount will increase to $470 million. Project outcomes contribute directly to Outcome 5 of the CPF – More Public Resources for Inclusive Development. By increasing FBR collections to 10 per cent of GDP in fiscal year 2027, the project aligns with CPF outcome indicator 5.1, which aims to raise the tax-to-GDP ratio to 15 per cent by 2035. Enhanced revenue collection will enable Pakistan to increase spending on essential services over time, meeting fiscal financing needs without generating excessive fiscal imbalances in the future. Beyond the CPF's outcomes and targets, the project also indirectly contributes to World Bank Group (WBG) Scorecard indicators related to improved access to services, better debt sustainability, and increased private investment. PRR is an Investment Project Financing (IPF) with an original allocation of $400 million, with a results-based component and an investment financing component. The results-based component ($320 million or Component 1) disburses against documented execution of eligible expenditures under the Eligible Expenditure Programs and the achievement of the Disbursement Linked Indicator (DLI) targets. These DLIs are linked with four objective areas: (i) simple and transparent tax system; (ii) effective control of taxpayers' obligation; (iii) facilitation of compliance; and (iv) institutional development for efficiency and accountability. The investment financing component (original allocation of $80 million, Component 2) mainly focuses on investment in the FBR's information and communications technology (ICT) systems, including ICT equipment, software and business process improvement, cargo weighing, contact-less scanning, and laboratory equipment for customs inspections (goods). It also finances consulting and non-consulting services for software development, technical assistance (TA), and training. AF activities will be conducted within the geographical scope of the existing project. The proposed restructuring responds to the request of the Government of Pakistan to scale up project activities under Component 2 to meet the FBR's emerging priorities, and to extend the duration of the Project. The proposed Level 2 restructuring supports: (i) AF of $70 million for new activities under the investment financing component; (ii) extension in the duration of the project by 24 months (until June 30, 2027); and (iii) an update of the results framework to reflect revised outputs linked with the investment financing component (change of previously approved activities), as well as align with the extended project duration until June 30, 2027. With this AF, the total Project amount will increase to $470million. Copyright Business Recorder, 2025
The Star
09-05-2025
- Business
- The Star
Residential construction activity rises in 1Q25 with surge in completions, housing starts
KUALA LUMPUR: Construction activity in the residential property subsector recorded significant growth in the first quarter of 2025 (1Q 2025) where the number of completed units surged by 30.2 per cent to 9,329 units from 7,168 units in 1Q 2024. According to director general of valuation and property services, Valuation and Property Services Department (JPPH), Abdul Razak Yusak, housing starts also rose by 32.5 per cent to 28,344 units in 1Q 2025 from 21,391 units in 1Q 2024, indicating a strengthening development trajectory for the residential subsector. However, planned new development is seen decreasing to 8,300 units in 1Q 2025 compared to 11,000 units in 1Q 2024, he said during the launch of the Property Market First Quarter 2025 report via Facebook live under JPPH. Meanwhile, he said there is encouraging performance of residential new launches which surged more than double to 12,498 units in 1Q 2025 from 5,585 units in the same period of 2024 with sales performance recorded at 10.8 per cent. He noted that property transaction performance experienced a slight decline, with the volume and value of transactions decreasing by 6.2 per cent and 8.9 per cent to 97,772 transactions valued at RM51.42 billion, compared to 104,194 transactions worth RM56.47 billion in the same period of 2024. Abdul Razak said although the property transactions began on a slower note, the robust pace of construction activity and the increase of residential new launches were supported to balance the property market growth and sustain its positive momentum in 2025. "The continuous government support through initiatives such as the Program Residensi Rakyat (PRR), Projek Rumah Mesra Rakyat (RMR), and strategic infrastructure development have been a key driver in accelerating construction activity. "Government-led initiatives aimed at strengthening Malaysia's position in the global investment prospects, such as the Forest City Special Financial Zone, the Johor-Singapore Special Economic Zone (JS-SEZ), and the implementation of a duty-free zone in Pulau Satu, Forest City have started to demonstrate significant impact,' he said. Abdul Razak said the performance of residential overhang recorded a total of 23,515 units valued at RM15 billion, reflecting a marginal increase of 1.6 per cent and 7.7 per cent in volume and value from 23,149 units worth RM13.94 billion in Q4 2024. In addition, the occupancy performance for shopping complexes recorded a marginal increase, with the occupancy rate rising to 79 per cent compared to 78.8 per cent in 1Q 2024. The Malaysian House Price Index (MHPI) in the first quarter 2025 stood at 225.3 points (an average price of RM486,070 per unit), with an annual growth rate of 0.9 per cent, he said. Abdul Razak said the growth of the property market is expected to remain resilient driven by positive momentum in the construction sector and a continued rise in newly launched residential units. "Special financial and infrastructure incentives under the JS-SEZ, the Special Financial Zone in Forest City Johor, and ongoing infrastructure development are expected to further stimulate long-term growth in the property market,' he added. - Bernama
Malaysian Reserve
03-05-2025
- Business
- Malaysian Reserve
KPKT channels over RM 203m for development, upgrading projects in Pahang
THE Ministry of Housing and Local Government (KPKT) has allocated over RM203 million for various development and upgrading projects in Pahang this year. Minister Nga Kor Ming (picture) said part of the allocation was channelled through Syarikat Perumahan Negara Berhad (SPNB) for the construction of houses under the Rumah Mesra Rakyat (RMR) programme, with a total of 782 units approved for construction this year. 'This RMR programme was established to assist households earning below RM5,000 who either do not own a home or live in dilapidated houses, but have land to build a proper and comfortable home,' he told a press conference after handing over house keys of the RMR and the Bina Baharu Rumah di Bandar programmes at Kampung Cempaka here today. Nga said the allocation also covers the construction of eight housing projects under the People's Residency Programme (PRR) worth RM61.73 million, which will be implemented through the Housing Planning Division of KPKT. He said PRR homes, designed to be integrated, conducive, and liveable with commercial-grade quality, will be developed in Kuantan, Jerantut, Bentong, Temerloh, Maran, Inderapura, and Bera. Nga said the projects also include the construction of a business centre in Cameron Highlands, the development of Pekan Sentral in Pekan, and slope maintenance works, for which RM21.13 million has been allocated. He said a further RM23.61 million has been allocated for solid waste management projects to be carried out by the National Solid Waste Management Department (JPSPN), in Kuantan, Lipis, Maran, Bentong, Cameron Highlands, Temerloh as well as Pulau Tioman. 'These projects are implemented to ensure the provision of a sustainable and efficient solid waste management system, in order to safeguard public health and preserve environmental and natural resources,' he said. Earlier, through the KPKT Sentuhan Kasih programme here, Nga inspected the upgrading project of the Pasar Besar Awam Kuantan as well as the public facilities at Taman Tasik Lestari in Teluk Cempedak. — BERNAMA
