Dua Ghani

23131
Seminar in Economic Policy

Q.Should there be an income tax on agricultural income? Suggest a reasonable solution also. Your
answer should exceed more than 300 words.

Ans. In a developing country such as Pakistan where agriculture still greatly contributes to its economy,
the matter of the taxation on the agricultural income still remains controversial as ever and speaks
volumes about the ineffectiveness of the law and order as well as the political sector.
There are two ways the whole issue can be viewed from;
First and foremost we have the farmers and other individuals who contribute to the agricultural sector,
their means considering the cost of production of crops surpasses their income by a lot at times which
makes it harder for them to bear the taxes especially when the tax is levied on their sole source of
earning.
Secondly we have the issue of Pakistan still being a developing country in the midst of political instability
which already reduces our ways to prosper. Making agricultural income taxes at par with other business
related income taxes can be extremely beneficial to the country’s economy and balances the horizontal
equity system.
In my opinion taxes on the agricultural income must be imposed but in such a way that the lower income
class of farmers must not be burdened but the landlord and landowners who have the means and
resources to contribute more to the taxes due their large incomes and prevalent assets.
What can be done?
The vertical equity system should be promoted- in which people with higher means must contribute more
to the taxes. The tax must be imposed on a fixed tax per acre basis, this won't be easy. This is where the
provincial government must step in to keep track and supervise the process through an efficient system
and keep track and the regulation of lands with respect to their productivity must be thorough. Making
sure land mafia and big landlords do not get away with their share of the tax payment and they shall be
required to make their other sources of income transparent.