Sindh's agri tax

Agriculture tax in Sindh is finally in vogue. The provincial cabinet that approved the Agricultural Income Tax Bill 2025, however, seemed a little perturbed and kept on changing goalposts for reasons of exigency. Apparently, it knows that it is taxing its political constituency and it was surprising to learn that the Chief Minister exhibited his discomfort over the federal government agreeing to the tax with the IMF without consulting the federating unit. It is common knowledge that the global lender had made it a prerequisite to slap tax to the tune of 45% on agri-income for the intended bailout package. Had it been so the farm tax would have broadened income to 1% of GDP. Sindh, nevertheless, has contended with a pleasing deal wherein farmers earning up to Rs150 million annually are exempted, and those from Rs150 million to Rs200 million will pay 1% tax, while higher income brackets will face rates up to 10% for earnings exceeding Rs500 million.

With the bill coming into effect from January 2025, it is estimated that the government will collect a maximum revenue of Rs300 billion, but at the same time has spared livestock from taxation. Likewise, there are many carrots and sticks such as a promise to adjust tax in case of natural disasters, small agricultural companies to be taxed at 20% and larger firms at 28%, and a warning from concealing cultivation facts. Last but not least, the cabinet has shifted the paradigm of collection from the Board of Revenue to the Sindh Revenue Board, perhaps for reasons of retaining the money with the province.

The CM also opened a Pandora's box by stating that implementing the new tax could cause inflation, and a rise in the prices of vegetables, wheat and rice. Likewise, he complained about the discriminatory statistics in the NFC share for his province, which is 24.55% compared to 52.74% of Punjab. That reflects that the cabinet's heart was not in taxation, leading to fears of its implementation. It goes without saying that in the absence of proper digitisation of land and lack of correct estimates of acre per yield, the tax collection might hang in the balance.