Agricultural Income Taxation: Estimation of the Revenue Potential in Punjab

Published - Nov 1, 2012

This Policy Brief 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 if the tax had been in place in the tax year 2010, the tax revenue from crop farming and land rental in Punjab would have been between Rs55-75 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 about Rs30 billion.

The brief concludes broadly that under the current income tax rates, the perception about the agricultural income tax poten- tial 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.

Authors

Cite this publication

Nasim, A. (2012, November). Agricultural Income Taxation: Estimation of the Revenue Potential in Punjab Policy Brief No.01/12. Institute of Development and Economic Alternatives (IDEAS).

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