Taxing agrarian income

With nod from all the provinces, imposition of agricultural tax is on the cards. It’s late but never too late, and it would have been wiser on the part of the government itself to tax the agrarian economy, rather than succumbing to the demands from the global lenders. As it is official now, the IMF has demanded imposition of 45% tax on agri-income and has made it a precondition for furthering the parleys on the next bailout package, which is likely to be to the tune of around $8 billion.

To overcome the dilemma and constraints of opting for a constitutional amendment, as the federation has no powers to tax agriculture, the IMF has mandated the provinces to do so by simply adopting the income tax rates of non-salaried business individuals that are as high as 45% of net income. If materialised, the land-holding class, feudals and all those who minted billions on agrarian production will be in the tax net, at least to the consolation of other sections of society who are conventionally burdened apparently for lacking a constituency to make their presence felt.

It is a pity that Pakistan, primarily being an agri-country, is off the hook of taxation on a sector that contributes 24% in the economy but does not pay even 0.1% of the total taxes collected from across the country. Apart from setting a deadline of October 2024 on agri-tax, the Fund has also asked for rescinding income tax exemptions for the livestock sector. This will have an impact on Balochistan where the livestock sector is supposed to be one of the biggest, but unaudited. Khyber-Pakhtunkhwa with negligible agrarian mosaic has a maximum income tax rate of 17.5% or Rs15,000 per annum, whichever is higher. It will also see an upward trend, like in Punjab and Sindh which have no excuse but to sign on the dotted line.

The farm tax will broaden income to 1% of GDP i.e. around Rs1.22 trillion, and should not become part of compartmental politics. The advice that only big farmers be taxed might be a ploy to fudge land-holding and produce among the family inmates as was done to avert land reforms in the past. It’s high time the farms are taxed.