SINDH Chief Minister Murad Ali Shah’s call for a ‘review’ of agricultural taxation to help relieve the burden on farmers affected by the ongoing floods is understandable. Thousands of farmers, particularly smallholders, across Punjab and Sindh have seen their crops destroyed, livestock swept away, livelihoods lost and homes collapse. In such circumstances, taxing them would deepen their misery. Tax relief for the affected farmers is not only justified, it is also necessary to help them recover. However, Mr Shah did not elaborate much on his comments, and it remains unclear whether he was talking only about temporary tax waivers or long-term exemptions, too. Neither was it clear whether he was suggesting an across-the-board waiver or relief only for the disaster-hit areas.

These distinctions matter because of the reluctance traditionally shown by provincial governments to tax agricultural income fearing the loss of political support from powerful landowners. The farm sector constitutes nearly a quarter of the economy. But its contribution to tax revenues is negligible. It was only under IMF pressure that the provinces amended their agriculture income tax laws to align them with the federal personal and corporate tax regimes. The willingness to implement the law to collect the levy is still to be tested. While immediate tax concessions are warranted in the flood-hit areas, the consequences of using the deluge as an excuse to give waivers to those who have escaped the flood devastation or to reverse the progress on agricultural income tax would negatively impact efforts to reform the inequitable tax system. For decades, large landowners have hidden behind the plight of smallholder farmers to avoid paying income tax. The result is an unjust system where the salaried and compliant corporate sectors carry the major tax burden to create resources for running the state. Equity demands that everyone pays their tax dues irrespective of the source of their income when it crosses the minimum exemption threshold.

Published in Dawn, September 19th, 2025