ISLAMABAD: The federal government has confirmed that provinces failed to meet the deadline for amending their agriculture income tax legislation, which was set for October 2024. This was disclosed during a presentation to the National Assembly Standing Committee on Finance, where officials provided an update on the quantitative performance criteria and structural benchmarks related to Pakistan’s ongoing International Monetary Fund (IMF) program.
The committee was informed that each province was required to amend its agriculture income tax laws in order to align with the federal personal income tax regime for small farmers and the federal corporate income tax system for commercial agriculture. These changes were essential to ensure the commencement of taxation from January 1, 2025. However, the deadline for these amendments, which was set for the end of October 2024, has now been missed by the provinces.
Despite the missed deadline, progress has been made in some regions. Officials revealed that Punjab has successfully enacted the necessary legislation. In Khyber Pakhtunkhwa (KP), the law has been approved by the provincial cabinet, and it is now awaiting presentation in the assembly. In Balochistan, the law was approved on November 11, 2024, and is also waiting for assembly approval. However, in Sindh, the provincial cabinet has not yet sought approval for the amendments, although work on the law has already been completed.
The Finance Ministry officials also outlined that the federal government plans to introduce a 5% Federal Excise Duty (FED) on pesticides and fertilizers in the upcoming fiscal budget. This move is part of broader revenue collection efforts, which include increasing the provinces’ tax collections in key areas such as sales tax on services, property tax, and agricultural income tax.
According to the document presented to the committee, the federal and provincial governments had agreed to a series of steps aimed at improving revenue collection and devolution of spending responsibilities. These include transitioning the services GST system to a negative list approach starting in FY 2025-26, raising corporate tax revenue from agriculture, and expanding property taxation. Additionally, provinces are expected to make contributions to federal health and education initiatives and reduce their involvement in support price announcements for raw commodities.
Governance measures have also been outlined, such as the implementation of the Electronic Pakistan Acquisition and Disposal System (e-PADS) and the adoption of green budget tagging by June 2025. Furthermore, provinces are expected to cooperate with national agencies like the Financial Monitoring Unit (FMU) and the National Accountability Bureau (NAB) to enforce anti-corruption and financial transparency measures.
The deadline missed by the provinces highlights the challenges in aligning provincial and federal fiscal strategies, but the government continues to work on key reforms aimed at improving tax compliance, expanding revenue sources, and strengthening governance at all levels.
