WITH the debate over tax reforms conti-nuing, I believe it is time to 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 relevant laws governing the system. However, the provinces have the authority to levy taxes on agriculture under the Constitution of 1973.

Indeed, the agriculture sector, like other sectors in the economy, can be, and should be, taxed. It surely has the potential to generate massive revenue, but even if that was not the case, the tax should still have been in place for purely logical reasons.

According to research conducted by the Pakistan Institute of Development Economics (PIDE), agricultural income tax in Pakistan can generate between Rs100-200 billion annually by targeting large landowners alone along with efforts to minimise tax evasion.

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

As a parting suggestion, the government should formulate a threshold-based tax-ation system because the introduction of agricultural income tax will help bridge the gap between different income groups, ens-uring a more balanced economic structure.

Azhar Altaf
Lahore

Published in Dawn, November 5th, 2024