Explicit and implicit taxation of agriculture

Last month, the Punjab Assembly took the lead in amending its agricultural income tax (AIT) law, increasing the maximum tax rate from 15 per cent (in Punjab and Sindh) to align with federal income tax rates for individuals and businesses, which reach up to 45pc. Other provinces are still deliberating similar changes, all in response to strings attached to the ongoing International Monetary Fund (IMF) programme. However, critics of AIT argue that historically, agriculturists have been consistently paying not only explicit taxes (direct and indirect) but also heavy implicit taxes — income loss to farmers due to government policies that favour urban consumers and the industrial sector. Such implicit taxation, which manifests in various forms, has largely been overlooked by those who vigorously advocate for imposing comparable AIT.