Taxation of agricultural incomes in Pakistan: Conceptual issues, data challenges and empirical estimates

Abstract

There is considerable diversity and variation in the land-based and agricultural income tax rates across the provinces in Pakistan. The annual landbased tax revenues from the cultivated land, including orchards, are estimated at Rs. 5 billion in Punjab, 2.5 billion in Sindh, one billion in KP, and less than half a billion in Balochistan. Based on the 2017-18 GDP estimates from crops, two sets of income tax revenues were estimated: one at the provincial rates and the other at the FBR tax rates for non-salaried persons. Tax revenues from crop income, at the current provincial rates, work out to Rs. 34 to 37 billion in Punjab, 7 to 8 billion in Sindh, 7 to 9 billion in KP, and 4 to 5 billion in Balochistan. Revenue estimates at the FBR rates are Rs. 112 to 134 billion in Punjab, 25 to 30 billion in Sindh, 9 to 10 billion in KP and 21 to 24 billion in Balochistan. These estimates are indicative of the revenue potential from taxation of crop incomes and need to be kept in perspective along with the cost of tax collection while designing policy instruments for taxing agricultural incomes.

Keywords

• agricultural income tax
• land-based tax
• crop income
• cultivated area
• tax revenue
• implicit tax