As such, the application of higher rates will not apply from January of this year, reported Express Tribune. Formalized through an ordinance promulgated by Sindh Governor Kamran Khan Tessori, the move to defer for one year the implementation of new tax rates means that agriculture, despite accounting for a quarter of Pakistan’s economy, will make less in income tax revenue than the salaried class.
Updated estimates show the latter paid Rs. 575 billion in income tax during fiscal year 2024-25, by contrast the former will remain in the low billions. A senior Sindh Revenue Board official sighed that Punjab too had put off the new rates last month, through a notification. Effective from January 1, 2025, the Sindh Agriculture Income Tax Amendment Ordinance 2025 abrogates IMF-agreed tax rates and restores the old structure: a 5% tax on annual income exceeding Rs. 1.2 million, and 15% above Rs. 4.8 million.
All four provinces previously agreed with the federal government and the International Monetary Fund (IMF) in December to bring provincial agriculture income tax rates in line with federal rates, beginning this month when collection would begin. The new ordinance, however, makes the new rates only a year later because it says that it is hard to enforce in mid-fiscal year a 45% rate.
It is not clear that the IMF and World Bank have given the go-ahead for this delay, though Pakistani officials insist that they are still in talks with both lenders. The official pointed out that such hard-hitting practical obstacles have seldom been a consideration when setting thresholds for the salaried class, although its threshold is much lower: Rs. 600,000 compared to Rs. 1.2 million for farmers.
Under the restored regime, a Sindh farmer will pay no income tax for annual earnings up to Rs. 1.2 million, 5% on Rs. 2.4 million, 10% on Rs. 4.8 million, and a maximum of 15% above that. By comparison, federal tax rates for equivalent income brackets are sharply higher, including 45% plus a 10% surcharge.
Meanwhile, the new amendment authorizes the Sindh government to change tax rates through executive notification in future, thereby escaping the need for a decision by the legislature. This reflects a method taken in Punjab, where such decision-making authority rests with the executive rather than the provincial assembly, and raises concerns about the weakening of parliamentary surveillance. At the same time, the amendment lets the government issue notices that can change tax rates going back, provided the notice is brought before the provincial assembly at the next annual budget session.
