Sales tax major contributor to rising poverty in Pak: WB

The General Sales Tax has the largest marginal contribution to the rise of poverty while a monthly cash transfer programme to the poorest families has the largest positive impact on inequality reduction in Pakistan, a World Bank study has said.

‘The Effects of Taxes and Transfers on Inequality and Poverty in Pakistan’ reports that the General Sales Tax (GST) payments account for over 7 per cent households’ pre-tax expenditure, which leads to further impoverishment among poor and vulnerable households.

Dawn reported on Sunday quoting the World Bank (WB) study that 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.

The second-largest impact on inequality comes from pre-primary and primary education expenditures, the WB study said.

It also reported that the Benazir Income Support Programme (BISP), which provides cash to the poorest families on a monthly basis has the largest positive impact on inequality reduction. The BISP cash transfer demonstrates the largest marginal contribution to inequality reduction, it added.

The study suggests that, while moving forward, Pakistan should improve its domestic revenue mobilisation and public expenditure efficiency to generate greater fiscal space. The additional fiscal space should be prioritised to expand social expenditure and to improve fiscal equity.