In Pakistan, agriculture is one of the major contributors to the economy, accounting for about 19% of the country’s gross domestic product (GDP) and providing employment to over 40% of the population. However, despite its importance, agriculture income tax in Pakistan is a contentious issue, with varying opinions on whether or not it should be imposed.

Currently, under the Income Tax Ordinance 2001, agricultural income is exempt from income tax. This exemption is provided under Article 2(37) of the ordinance, which defines agricultural income as income derived from land used for agriculture purposes. The rationale behind this exemption is to provide relief to small-scale farmers and encourage agricultural development in the country.

However, critics argue that the exemption of agriculture income from taxation is unfair and regressive, as it puts a disproportionate burden on non-agricultural taxpayers. Furthermore, it is argued that many large landowners and commercial agricultural enterprises exploit this exemption to avoid paying taxes on their income.

To address these concerns, there have been several proposals to impose a tax on agriculture income in Pakistan. For example, in the 2019-20 budget, the government proposed to tax agriculture income above Rs. 400,000 ($2,600) per year. However, this proposal was met with strong opposition from the agricultural lobby and was eventually withdrawn.

Proponents of agriculture income tax argue that it can generate significant revenue for the government, which can be used for social welfare programs, infrastructure development, and poverty alleviation. According to a report by the International Monetary Fund (IMF), the potential revenue from agriculture income tax in Pakistan is estimated to be around 0.5% to 1% of GDP.

However, opponents argue that the imposition of agriculture income tax would hurt small-scale farmers and discourage investment in agriculture. They also point out that the implementation of such a tax would be challenging, given the fragmented nature of the agriculture sector and the difficulties in valuing agricultural produce.

In conclusion, the issue of agriculture income tax in Pakistan is a complex and controversial one, with valid arguments on both sides. While the potential revenue from such a tax could be significant, it is important to ensure that it does not disproportionately affect small-scale farmers and hinder agricultural development in the country.

Figures:

• Agriculture contributes around 19% to Pakistan’s GDP (Source: World Bank, 2021)
• Over 40% of the population is employed in the agriculture sector (Source: Pakistan Bureau of Statistics, 2021)
• The potential revenue from agriculture income tax in Pakistan is estimated to be around 0.5% to 1% of GDP (Source: International Monetary Fund, 2019)