The federal government is considering a fixed tax on agricultural income if provinces fail to meet their agriculture income tax collection targets by September 30.
The move comes amid concerns raised by the International Monetary Fund (IMF) over delays in collecting agriculture income tax. The federal government is currently awaiting provincial tax returns before deciding whether further measures are required.
The government is expected to review provincial agriculture income tax collections after September 30. If the targets remain unmet, consultations with the provinces could begin in October over introducing a fixed tax regime for the agriculture sector.
Under the proposed system, farmers and landowners could face a fixed tax structure similar to the mechanism being considered for the trading sector. The tax could potentially exceed Rs. 5,000 per acre, although the final rate would be determined after discussions with the provinces.
Agriculture contributes around 24.5 percent to Pakistan’s economy but generates only about 0.5 percent of total tax revenues. The proposed measure reflects the government’s efforts to expand the tax base and increase revenue from the sector.
The potential tax reform also comes as Pakistan works to fulfill its tax-related commitments under the IMF program, making provincial agriculture income tax collections an increasingly important component of the country’s revenue strategy.
