The report reviews the current state of agricultural taxation in Pakistan, revealing two key flaws: the revenue raised from the taxes is minimal, while income from agriculture results in widespread tax evasion, with even non-agricultural income being declared as agricultural income. The study conveys that the previous policy framework of heavy, implicit taxation of agriculture, through over-valued exchange rates, export taxes, and others, at unfavorable prices, was conducive to tax evasion. However, implicit taxation has diminished, and the scope for a new agricultural tax system does exist at the provincial level, and the issue has been forwarded for high level political, and economic discussion. A set of principles, and practices from other countries is explored, as well as the reasons for taxing agriculture, and, administrative aspects of agricultural taxation. Lessons from international experience are presented, to help reform the current system, and, options for this reform are outlined, with estimates of revenue potential, addressing the broadest option, as the introduction of a general income tax on the agriculture sector, based on presumptive income. Recommendations for reform suggest a gradual three-phase approach in the agricultural tax system, to further ensure tax equity.
Complete Report
Official version of document (may contain signatures, etc)
PDF 62 pages Official Version [4.34 mb]
Source:- The World Bank Group
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