Taxing Agriculture in Pakistan

IMF Policy Discussion Papers, May 1, 1998

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Pakistan’s economic performance has been marred by persistently high fiscal deficits which have resulted largely from the inability to raise sufficient revenues.
Agriculture is a dominant sector of the economy, but generates very limited revenue from direct taxes on agricultural producers.
The paper reviews the history of attempts to tax agriculture in Pakistan to underscore the difficulty in adopting and implementing a sound agricultural tax policy.

Reviews the history of attempts to tax agriculture in Pakistan to identify institutional, legal, and practical barriers.
Emphasizes the political-economy and constitutional constraints that have complicated past reform efforts.

Examines various alternatives with regard to the taxation of agricultural land and incomes.
Considers options concerning taxation of agricultural land, agricultural incomes, and related tax instruments within Pakistan’s constitutional framework.

Presents the outlines of a full-fledged agricultural income tax that could be implemented within the Constitutional framework in the next three to five years.
The proposal is positioned as an implementable reform pathway rather than an immediate overhaul, taking into account legal and administrative feasibility.

Strengthen revenue mobilization by bringing a larger share of agricultural income and land into the tax net.
Design reforms mindful of constitutional constraints and the practical difficulties highlighted by the historical review.
Sequence reform implementation over a medium-term horizon (next three to five years) to improve acceptability and administrative readiness.

Taxing Agriculture in Pakistan, IMF Policy Discussion Papers (1998), by Mahmood Hasan Khan and Mohsin S. Khan.

Taxing Agriculture in Pakistan - PPAA/98/3
- Taxing Agriculture in Pakistan - PPAA/98/3 (Markdown version)
- Taxing Agriculture in Pakistan - PPAA/98/3 (PDF)