Distribution of Agricultural Tax Burden within the Sector

Abstract

Considerable work has been done on the estimation of tax burden on agriculture, but not enough on its distribution within the sector. The main estimators of tax burden are: Qureshi (1986), Qureshi (1987), Dorosch and Valdes (1990), Hamid, Nabi and Nasim (1~), Chaudhry and Kayani (1991) and Chaudhry and Maan (1991a). The estimates of the tax burden made by various authors are mutually not comparable due to differences in coverage, assumptions and methodologies used. The latest and the most comprehensive estimate of the total tax burden on agriculture is that of Chaudhry and Maan (1991a). The authors have included in their estimates the burden of all the direct, indirect and implicit taxes of the federal, provincial and local governmeitts on agriculture. The total burden on these taxes adds up to an incredible level of 44 percent of the value added in agriculture during the 1980s. The breakdown of the tax burden shows that direct taxes account for less than one percentage point and the local taxes for less than two percentage points. Half of the tax burden (22 percent) is contributed by indirect taxes (and non-tax revenues). The remaining 20 percent of the tax load is due to implicit taxation.