Moaaz Manzoor

The passage of agricultural income tax laws across all provinces is a significant step towards broadening Pakistan's tax base, but effective implementation remains a challenge due to the gaps in enforcement and administrative capacity, reports WealthPK.

With the passage of the laws in all four provinces, Pakistan has met a key IMF requirement aimed at broadening its tax base. Sindh was the last to approve the amendments, aligning with Punjab, Khyber Pakhtunkhwa, and Balochistan. While this marks a significant policy shift, experts argue that the true challenge lies in tax collection and addressing the administrative capacity gaps.

Dr Ikramul Haq, tax policy expert and adjunct faculty at LUMS, as well as a member of the Advisory Board and Visiting Senior Fellow of (PIDE), pointed out that while the agriculture sector made up about 20% of Pakistan’s GDP, it had long been exempted from proper taxation. The new amendments, which aim to tax agricultural land leasing and ownership, hold promise, but implementation will depend heavily on strengthening the administrative capacities.

Dr. Ikram said the issue was not lack of policy but the local tax authorities’ inability, especially Patwaris, to efficiently track and collect taxes. With the right data and improved administrative systems, there is potential for a meaningful progress, but the gaps in capacity must be tackled for these reforms to truly take effect.

Dr. Sajid Amin Javed, Deputy Executive Director of the Sustainable Development Policy Institute (SDPI), welcomes the taxation move, emphasizing that Pakistan's tax burden must be shared more equitably. "Since 2024, the government has rightly focused on expanding the tax net instead of overburdening the existing taxpayers," he said. However, he stressed that awareness and public engagement are crucial.

"People resist taxation when they see it as merely a revenue-generating exercise. The government must link taxation to the national development and economic growth." He also praised the elimination of legal category of “non-filers,” arguing that it removed loopholes and strengthened compliance. “The government must now push forward by incentivizing the taxpayers while strictly implementing rules," he added. While the passage of amendments is a critical first step, the real test lies in implementation.

Pakistan’s tax authorities face serious capacity gaps in enforcement, data collection, and taxpayer compliance. Without strong institutional mechanisms and targeted awareness campaigns, the impact of these reforms could remain limited. Sustainable tax reforms require policies, political will, and administrative efficiency.

Credit: INP-WealthPk