Contrary to popular misconception, agricultural income in Pakistan is already taxed. However, it differs from other forms of income in two key ways. First, the collection of agricultural income tax (AIT) falls under the jurisdiction of the provinces. Second, the maximum tax rate for agricultural income is just 15 per cent in Punjab and Sindh — far lower than the rates for salary and business income.

After the federal budget announcement, the government has been under rising pressure from various quarters — particularly salaried class — to align AIT rates with the federal business income rates, to ensure horizontal equity — people with the same income should pay the same amount in taxes.

One of their arguments posits that total revenue collection under the AIT is less than Rs4 billion, which accounts for less than 0.01pc of the national GDP. The amount seems negligible when juxtaposed with the sector’s sizable 24pc contribution to the GDP, amounting to Rs22 trillion.

Basically, the agriculture sector comprises several subsectors such as crops, livestock and dairy (including poultry), fisheries and forestry. Nevertheless, the crops subsector is often wrongfully equated with the entire agriculture sector, and thus landlords are only discussed when it comes to tax concessions.

Requiring all farmers with more than 12 acres to file agriculture income tax returns would result in around 0.7m returns annually, which will require an institutional setup at least one-fifth the size of the FBR

In reality, the crop subsector contributes a mere 8.54pc to the country’s GDP, while the rest of the........

© Dawn Business