The Potential For Increasing Agricultural Taxes In East Pakistan

No one tax system is best suited for all countries or even for one country at all points of time. The tax structure as well as the tax level should change with the structural change in the economy during development. Otherwise the government expenditure-revenue gap over time may become too wide and result in inflation and political instability. Agricultural taxes can play an important role in a growing economy. But in practice we find from different studies that the share of agricultural taxes in government in most of the developing countries is declining. There is a growing view among economists that agriculture in many of the less developed countries (LDC's) is undertaxed. If tax policy is not changed it is highly likely that agriculture will not contribute an appropriate share to government revenue out of the new income generated from the Green Revolution. In this framework this paper explores the role, need, and perspective of agricultural taxes during economic transformation. Agricultural tax experiences in selected developing countries have been cited as examples to provide certain results of possible applicability to East Pakistan.