Implicit Taxation of Pakistan’s Agriculture: An Analysis of theCommodity and Input Prices

The purpose of the present paper has been to quantify anddiscuss the implications of implicit taxes in Pakistan’s agriculture.The methodology of the paper consisted of derming the impon and exponparity prices of major agricultural commodities grown in Pakistan, bycomparing them with domestic procurement prices. Although the analysiscovered only four commodities, implicit tax rates in some of the yearsfrom 1970-71 to 1989-90 were as high as 75 percent for cenaincommodities. It was only in the case of IRRI rice and sugarcane thatdomestic prices were above the world levels in some years of the periodunder consideration. When shown as a percentage of the value-added byagriculture, the taxes on these four commodities, net of the totalbudgetary subsidies on agricultural inputs, varied from 1.9 percent to14.9 percent. These tax rates in agriculture compared favourably withthe overall tax rates in Pakistan’s economy for most of the years.Judged in the light of the relative taxable capacities of agricultureand Pakistan’s economy as a whole, implicit taxes were much higher inagriculture than in the other sectors of the economy.