Arooj Zulfiqar

Experts have advocated for implementing progressive agricultural taxes to tackle Pakistan's economic difficulties. They believe that this tax

reform could substantially enhance government revenue, promote rural development, and improve economic stability. “Introducing agricultural taxes requires careful consideration given Pakistan's economic situation. While the potential benefits are significant, the complexities and challenges must also be addressed,” said Shahzad Amir Naveed, an agriculture sector specialist serving with the Ministry of Planning, Development & Special Initiatives. Talking to WealthPK, he said, “Agriculture is crucial to Pakistan's economy, contributing significantly to GDP and employing a large portion of the population. However, the longstanding exemption of agricultural income from taxation has resulted in revenue shortfalls, exacerbating fiscal deficits and economic instability,” he said, noting the case for introducing agricultural taxes was compelling.

“A progressive taxation system could ensure that larger landholders and people with higher agricultural income contribute their fair share. Meanwhile, exemptions or reduced rates for small-scale farmers would protect their livelihoods. This dual approach strikes a balance between fiscal responsibility and social equity," Shahzad explained. “To maximise the benefits of agricultural taxation, it is essential to modernise the tax collection process through the use of technology. Transparent and efficient collection mechanisms not only reduce tax evasion but also increase public trust in the system, which in turn can boost compliance,” M Azeem, a senior scientific officer at National Agricultural Research Centre, stressed.

Speaking to WealthPK, he added, “Investing a portion of the revenue generated through agricultural taxes into rural development is a key strategy. These funds can be channeled into infrastructure development, agricultural modernisation, and other projects that can catalyse economic growth in rural areas,” he said. While the proposal offers a promising path forward, it is not without challenges. The diversity of Pakistan's agricultural landscape requires a tailored approach that accommodates different practices, land sizes, and income levels. Policymakers must ensure that the tax system is flexible enough to account for these variations, thereby avoiding undue burdens on specific segments of the farming community.

Credit: INP-WealthPk