AS the debate over Pakistan’s tax reforms continues, I believe it is time to actively consider the imposition of agricultural income tax as a vital step towards fiscal stability.

In Pakistan, agricultural income is largely exempt from federal income tax under the Income Tax Ordinance, 2001, but provinces have the required authority to levy taxes on agriculture as per the Constitution.

The agriculture sector, like other sectors in the economy, should be taxed because it has the potential to generate a huge amount in taxes. For instance, according to the Pakistan Institute of Development Economics (PIDE), agricultural income tax in Pakistan may generate up to Rs200 billion annually if large landowners are targeted.

The imposition of agricultural income tax would increase the tax revenue, encourage record-keeping by formalisation of the sector, and improve the efficiency and equity because wealthier farmers would contribute a fair share of taxes.

The government should also formulate a threshold-based taxation system because the introduction of agricultural income tax will help bridge the gap amonmg all income groups, ensuring a more balanced economic structure.

Azhar Altaf
Lahore

Published in Dawn, October 16th, 2024