KARACHI: Pakistan’s tax collecting agency has launched a major $149mn reform plan with the lion’s share of the cost being picked up by the World Bank, an official said yesterday.

The administrative shake-up, being implemented over the next five years, is aimed at increasing revenues in a country where only 1.1% of the total 150mn population pay income tax.

It will involve encouraging taxpayers to assess themselves instead of relying on a national inspection system that many Pakistanis regard as corrupt, as well as increasing automation, officials said.

“It would increase the revenue and the base of taxpayers, improve efficiency and make the tax regime friendly for the payers,” Central Board of Revenue spokesman Hafeez Mughal said.

The World Bank is providing $102.9mn of the total, while Britain’s Department for International Development has allocated $23mn and the Pakistan government has given $23.1mn, he said.

The reform plan is due to be completed by June 2009.

The tax agency said on its website that the reforms were the single most important economic task for the government as it tackles Pakistan’s “deep” fiscal crisis.

“Pakistan cannot be governed effectively, essential public services cannot be delivered and high inflation is inevitable,” it said.

Another official from the board said the reforms were necessary to increase Pakistan’s “very low” tax to gross domestic product (GDP) ratio.

M S Lal said that currently Pakistan’s tax-GDP ratio is 12.9% whereas it should be at least 16 to 17%. - AFP