Provincial Tax Reforms However, the agricultural income tax currently yields a paltry Rs 3 billion in the whole of Pakistan. The estimated net crop income in farms of 25 acres or more is Rs 670 billion in 2020-21. As such the incidence of the tax is currently only 0.4 percent of net income of farmers, who should be in the tax net with large farms of 25 or more acres. Currently, the agricultural income tax in Punjab is land based, despite the presence of an income-based alternative. The tax structure is given below: 1. Up to 12.5 acres Exempt 2. 12.5 – 25 acres Rs 100 per acre 3. 25 acres – 50 acres Rs 250 per acre 4. 50 acres or more Rs 300 per acre According to this tax system, the revenue yield in Punjab should be Rs 2.6 billion. The actual revenue was Rs 2.0 billion. Clearly, the Board of Revenue has attached low priority to collecting revenue from the tax. The reform of the tax should be a significant enhancement in the flat tax rates, given that the average net income per acre is at least Rs 30,000 in Punjab. However, the income per irrigated acre is approximately two times the income in barani areas. Also, the flat rates should be made more progressive. The proposed tax system may continue to be presumptive in nature to preserve the simplicity of the system. The tax liability may be linked to farm size with an irrigated farm treated as twice the taxation size of a barani farm of the same physical size. However, the proposed tax system is more progressive as follows: Farm Size(Acres) (Measured in equivalent barani area) < 25 25 – 50 50 – 100 100 – 150 150 and above Tax Rate per Exempt Rs 500 per acre Rs 1,000 per acre Rs 2,500 per acre Rs 5,000 per acre The estimated revenue yield is Rs 60 billion in Punjab. With a similar tax system in the other three Provinces the potential revenue is Rs 45 billion. Therefore, the estimated revenue yield from the agricultural income tax is Rs 105 billion. However, given the big jump in the PIT rates the implementation process will have to be somewhat staggered. Urban Immoveable Property Tax The property tax currently yields Rs 14 billion in Punjab and under Rs 6 billion in Sindh. The tax is not only progressive in nature but also the major source of revenue to local governments, although collection continues to be by the Provincial Excise and Taxation Departments. A case study is undertaken below of the property tax system in Sindh. 109