Karachi, March 22, 2025 – A recent study by the Institute of Cost and Management Accountants of Pakistan (ICMAP) has highlighted that Pakistan’s agriculture tax rates are among the highest in the region, raising concerns about enforcement and long-term sectoral impact.
These tax measures, introduced under conditions set by the International Monetary Fund (IMF), place a significant financial burden on the agriculture sector.
The ICMAP report provides a detailed analysis of the newly imposed agriculture tax, which marks a shift from Pakistan’s historical stance of largely exempting the sector from direct taxation. As part of the IMF’s $7 billion loan program, the government has mandated provincial-level taxation on agriculture income, with rates ranging from 15% to 45%, along with an additional 10% super tax on high-income landowners. While implementation was initially delayed, full enforcement is now expected by July 2025, with Punjab and Sindh projected to generate the highest revenues. According to the World Bank, these tax reforms could contribute up to 1% of Pakistan’s GDP.
Pakistan’s Agriculture Taxation vs. Regional Standards
A comparative analysis by ICMAP reveals that Pakistan’s agriculture tax rates are considerably higher than those in neighboring SAARC countries, including Bangladesh, India, and Sri Lanka. The report warns that such high taxation could discourage compliance, limit investment in the sector, and ultimately hinder long-term agriculture growth.
Challenges in Agriculture Tax Implementation
The report outlines multiple barriers to enforcing the agriculture tax, including:
• Outdated land records and unreliable farm income data.
• Weak enforcement mechanisms, leading to widespread underreporting and tax evasion.
• Political influence of large landowners, who resist taxation.
• Limited digital monitoring systems, making income tracking difficult.
• Economic strain on small farmers, who operate on thin profit margins and struggle to absorb higher costs.
Small farmers argue that increased taxation could drive up production costs, leading to higher food prices and exacerbating inflation and food security concerns. The lack of a clear taxation infrastructure at the provincial level also complicates enforcement, leading to inefficiencies and revenue shortfalls.
ICMAP’s Recommendations for a Balanced Approach
To ensure effective yet fair implementation, ICMAP suggests a phased and structured approach to agriculture taxation:
• Targeting large landowners first, before extending taxes to smaller farmers.
• Modernizing land records through digital databases for accuracy.
• Providing tax incentives on essential inputs like fertilizers, seeds, and equipment.
• Strengthening tax administration through training, technology, and improved coordination between federal and provincial authorities.
• Launching public awareness campaigns to educate farmers about tax compliance and benefits.
The ICMAP emphasizes that while taxing the agriculture sector is necessary to broaden Pakistan’s tax base, it must be done transparently and equitably to avoid disrupting agricultural productivity and rural economies. Effective enforcement, stakeholder engagement, and policy refinements will be critical in ensuring long-term sustainability without negatively impacting food security or farm incomes.