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Agricultural Income Taxation: Estimation of the Revenue Potential in Punjab

Author

Listed:
  • Anjum Nasim

    (Institute of Development and Alternative Strategies (IDEAS), Lahore)

Abstract

This paper attempts to quantify the potential income tax revenue from crop farming and land rental in Punjab, the province which accounts for over 65 percent of the production of most major crops in Pakistan. Our estimates suggest that in the tax year 2010, the tax revenue potential from crop farming and land rental from an agricultural income tax, at rates comparable with federal income tax, was Rs 55–75 billion. Using a more limited data set to project taxable income for the financial year 2012-13 and using the tax rates applicable under the Finance Act 2012, the tax potential for the tax year 2013 is estimated to be about Rs 30 billion. The paper concludes broadly that under the current income tax rates, the perception about the agricultural income tax potential is exaggerated, but the revenue potential is still very large relative to the actual tax collection by the provinces. Taxing this source of income at rates applicable to similar incomes in other sectors of the economy will not only supplement the finances of the provincial governments, but will also have an important symbolic value in terms of fairness and equity.

Suggested Citation

  • Anjum Nasim, 2012. "Agricultural Income Taxation: Estimation of the Revenue Potential in Punjab," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 321-337.
  • Handle: RePEc:pid:journl:v:51:y:2012:i:4:p:321-337
    as

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    File URL: http://www.pide.org.pk/pdf/PDR/2012/Volume4/321-337.pdf
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    References listed on IDEAS

    as
    1. Dorosh, Paul & Valdés, Alberto, 1990. "Effects of exchange rate and trade policies on agriculture in Pakistan:," Research reports 84, International Food Policy Research Institute (IFPRI).
    2. Mahmood Hasan Khan, 1978. "A Note on Estimates of Agricu,tural Income Tax in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 17(1), pages 89-98.
    3. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521397421, March.
    4. M. Ghaffar Chaudhry & Nighat Naheed Kayani, 1991. "Implicit Taxation of Pakistan's Agriculture: An Analysis of the Commodity and Input Prices," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 30(3), pages 225-242.
    5. Skinner, Jonathan, 1991. "Prospects for Agricultural Land Taxation in Developing Countries," World Bank Economic Review, World Bank Group, vol. 5(3), pages 493-511, September.
    6. Javed Hamid, 1973. "The Problem of Agricultural Taxation in West Pakistan and an Alternative Solution. A Comment," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 12(3), pages 311-314.
    7. Faiz Mohammad, 1987. "Agricultural Taxation in Pakistan Revisited," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(4), pages 419-432.
    8. Umir Wahid & Sally Wallace, 2008. "Incidence of Taxes in Pakistan: Primer and Estimates," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0813, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. Javed Hamid, 1970. "Suggested Approach to Agricultural Taxation Policy in West Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 10(4), pages 422-447.
    10. M. Ghaffar Chaudhry, 1999. "The Theory and Practice of Agricultural Income Tax in Pakistan and a Viable Solution," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 757-768.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agriculture Tax; Pakistan Agriculture;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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