Experts welcomed International Monetary Fund’s (IMF) push to increase agriculture tax, a development that comes after authorities in Pakistan reached an agreement for a $7-billion 37-month Extended Fund Facility (EFF) with the Washington-based lender on Friday.
Similar to the previous programmes, Islamabad will now be required to tick a number of prerequisites to claim the funds going forward, which includes the usual demands for fiscal consolidation, appropriate monetary policy, flexible exchange rate and reforms on the energy sector.
However, this time around, the reforms’ agenda also includes the country’s agriculture sector and its income being brought into the taxation system.
Finance Minister Muhammad Aurangzeb, this week, had also said that in-principle an understanding with the provinces has been reached with regard to taxing agriculture income.
The IMF in its statement stated that “all provinces are committed to fully harmonising their Agriculture Income Tax regimes through legislative changes with the federal personal and corporate income tax regimes and this will become effective from January 1, 2025”.
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Tahir Abbas, Head of Equities at Arif Habib Limited (AHL), termed the IMF demand a “step in the right direction.”
“This will broaden the country’s tax net and increase the number of filers, while also reducing tax evasion,” he told media.
At present, the agriculture sector in Pakistan contributes 22% to the nation’s GDP and employs one third of its workforce.
However, despite the size of this sector, its contribution towards the national kitty is negligible.
“We collect only Rs3 billion from the entire agri sector in the country as compared to nearly Rs400 billion from the salaried class,” Abbas said.
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