Agricultural workers in Sindh shell out greater amounts for vehicle registration compared to the income tax they pay.
In the latest financial breakdown, Sindh's government projects a significant surge in revenue collection from motor vehicle registration fees, amounting to an impressive Rs9.35 billion by the end of this fiscal year. On the flip side, income tax from the province's agricultural sector is expected to reach just Rs4 billion, underlining a striking economic imbalance.
It appears that the middle, upper, and rural elite agriculture income earners enjoy considerable lifestyle spending, yet contribute surprisingly little in taxes, contributing to a heavy tax burden on compliant industrial and service sectors, as well as salaried workers outside agriculture.
Compared to agriculture taxes, which range from 15% to 45% post-January 1, 2025, and a super tax from 1% to 10% for high agricultural incomes, the motor vehicle registration fees are relatively low - ranging from 1% to 5% of the vehicle's value, depending on engine size.
Currently, agriculture is a significant source of income for around 55.7 million people residing in rural areas, including farmers, landlords, and large-scale agricultural businesses. During the first half of the current fiscal year, agricultural income tax ranged from 5% to 15%, but contributors to provincial tax revenues remain disproportionately low.
Car sales in rural Sindh, particularly during harvest seasons and around Eid-ul-Adha, show a surge in vehicle purchases, further highlighting the stark contrast in tax contributions between the agricultural sector and motor vehicle registration fees.
As more cars flood rural garages while agricultural income taxes remain surprisingly low, the numbers tell a deeper story - of wealth, visible on the roads, but not reflected in the tax rolls. Agriculture represents around 23.54% of Pakistan's gross domestic product, but makes up only 1% of revenue in taxes.
Critics argue that new legislation and higher tax rates may make agricultural produce more expensive for consumers. Opposition from farmers and concerns about bureaucratic mismanagement remain contentious issues. Sindh, however, has set a target of collecting Rs8 billion in agricultural income taxes in the next fiscal year, while motor vehicle fees are expected to remain stable at Rs9.35 billion.
Despite ongoing analysis and proposed changes, the enigma of agricultural tax contributions in Sindh persists. Lower tax compliance, economic and political considerations, as well as the simplicity of motor vehicle fees, all contribute to this puzzling situation.
- The significant growth in revenue collection from motor vehicle registration fees in Sindh, contrasted with the low agricultural income taxes, indicates a profound financial imbalance in the province.
- The motor vehicle registration fees, although comprising a smaller percentage of the vehicle's value compared to agricultural taxes, are a notable source of revenue for Sindh, while agricultural taxes contribute disproportionately less.
- The rise in car sales in rural Sindh, coupled with the relatively low agricultural income taxes, underscores a paradoxical situation where wealth, as demonstrated by the increasing number of vehicles, is not adequately represented in the tax rolls.
- The challenge lies in increasing agricultural income taxes to reflect the value of the agricultural sector, which constitutes a significant portion of Pakistan's gross domestic product, while maintaining a balance in the financial burden on farmers and consumers.
