Managing the Public Finances The flat rates by farm size of the agricultural income tax to be set as follows given below: Farm Size (Acres)* Tax Rate per Acre < 25 Exempt 25 – 50 Rs 250 per acre above 25 acres 50 – 100 Rs 6250+ Rs 500 per acre above 50 acres 100 – 150 Rs 31250+ Rs 1000 per acre above 100 acres 150 and above Rs 81250+ Rs 2500 per acre *Barani acres. Twice the farm size for irrigated acres The urban immoveable property tax yields only Rs 26 billion annually and only Rs 10 billion in Karachi. There is significant revenue potential of this tax. Exemptions should be given on properties located on plots of up to 240 sq yds or with covered area of less than 800 sq ft. Beyond the exemption, the Gross Annual Rental Values may be assessed initially at equal to 2 percent of the capital value of properties. These capital values can be obtained at the level of localities from the nationwide comprehensive valuation of properties by FBR. 16.2 Lack of Broadening of the Tax System The tax system of Pakistan is currently heavily skewed towards the industrial sector. Research reveals that the distribution of nominal incidence by sector is as shown in Figure 16.1. Figure 16.1: Sectoral Share of GDP and Tax Revenue Generation SHARE OF SECTORS IN GDP SHARE OF SECTORS IN TAX REVENUE GENERATION 165