The Sindh government's decision to defer collection of agriculture income tax from January 2025 at the rate of 45%, as agreed with the IMF, is a clear act of defiance – to say the least. This politically-exigent move comes in the footsteps of Punjab, which had also put off collecting the enhanced revenue from the farms for a year.
It is little known as to how the Washington-based lender will react to this deferment, and how the federal government will deal with the books to stay afloat. What is certain, however, is that the beleaguered political dispensation has once again caved to pressure from influential landlords in the provincial assemblies.
An aftermath of this decision, meant to appease the land-wielding classes, will see revenue generation dip by billions of rupees, and that too at the cost of salaried persons who paid Rs575 billion in income tax in FY25. Under the new ordinance promulgated by Sindh, the feudal class will pay agriculture tax at the previous rate of 15%. The new scales are 5% tax on annual income of over Rs1.2 million to just 15% on income above Rs4.8 million. Whereas, the no-tax ceiling for salaried class is just Rs600,000.
It is a pity that the agriculture sector that has a 25% share in the national economy is hardly an income tax-payer in terms of volume and utility. That is why under a deal with the Fund, all the federating units had agreed to introduce an enhanced agri-tax slab of 45% from January 2025. It was estimated that Sindh would collect a maximum revenue of Rs300 billion, even though it had spared livestock from taxation. But that could not see the light of the day because taxing the political constituency solicits leadership and courage in national interest, an element badly missing in our midst.
The move coming through an ordinance is detrimental to parliamentary supremacy. On top of that Sindh and Punjab have sought to alter the income tax rates in future without amending the relevant laws. Unfortunately, a very few at the helm care about going by the book and keeping with foreign accords.
