IT is not a good omen that reforms are once again being delayed. According to the finance minister, a new tax regime for agricultural income, agreed to by all provinces under the National Fiscal Pact in accordance with the conditions of the latest IMF programme, will now become effective July 1 next year, with relevant legislation to be passed by January 2025. It may be recalled that in July, the IMF had recommended that taxes on agriculture be brought in line with the tax structure for non-salaried individuals. It may also be recalled that President Asif Zardari had publicly expressed apprehensions regarding the proposal, disowning it as a ‘condition’ imposed by the IMF when he should have encouraged the measure as a necessity given Pakistan’s dire financial condition. It also seems pertinent to point out that this new regime was supposed to take effect by January 2025, not six months later, as we are now being told.

It is no secret that some of the most powerful individuals in the country, be they politicians, bureaucrats, military men or judges, are direct or indirect beneficiaries of Pakistan’s critically deficient farm income tax regime. Not only that but because the sector is geographically dispersed and has operated largely off the books for so long, it is difficult to properly document it to be able to impose an equitable tax regime. Mainly for these reasons, agricultural tax reforms have been put off year after year, decade after decade. However, given the present conditions, it was expected that policy circles would show greater urgency in implementing critical reforms. Tax-compliant sectors and the salaried class have already been squeezed to the limit. It is unfortunate that they will continue to pay through their noses, while the farm sector enjoys its privileges for another year. And even then, one can only hope that tax reforms will not be delayed any further.

Published in Dawn, October 11th, 2024