Sindh farmers reject agri tax, threaten wheat boycott

ISLAMABAD: A representative body of farmers from Sindh has asked its members to stop growing wheat and support its legal challenge to a new income tax on agriculture, in a setback to Pakistan’s agricultural sector. The decision has raised fresh concerns over the future of Pakistan’s wheat crop and relations with the International Monetary Fund (IMF), whose conditions for a USD seven billion loan included imposition of a tax on farm incomes. Under that agreement, Pakistan’s provinces were obliged to assess and collect an income tax on incomes from agriculture.

Across Pakistan, farmers were hit hard in early 2024 when prices of wheat dropped by more than a third, after the provincial government of Punjab abruptly retreated from purchasing stocks of the new crop at a price that it had promised earlier. That decision forced down the price of wheat all over Pakistan.

Almost three quarters of Pakistan’s area under wheat cultivation lies in the Punjab, while the wheat cultivated in Sindh accounts for less that 15 percent of Pakistan’s total area, according to published figures. But the warning from the Sindh Chamber of Agriculture (SCA) this week has highlighted increasing anger among wheat farmers.

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The SCA has also told its members not to pay a newly imposed income tax on farm incomes, as it prepares to legally challenge the tax in the Sindh High Court.

“We believe we have a strong case. Agriculture in Pakistan is today no more profitable and there is no system in place in the provinces to begin assessing and charging an income tax on agricultural incomes” said Syed Nadeem Qamar, head of the Sindh Chamber of Agriculture (SCA) in a telephone interview with HUM News. “Outside Pakistan, there are countries which are still giving subsidies to agriculture. But we have removed all subsidies for agriculture which has made agriculture unprofitable” he said.

Earlier this year, the federal government was forced to suspend plans for building new canals in Sindh drawing water from the Indus river, after farmers launched angry protests.

A large landowner from Sindh who spoke to HUM News on condition that he will not be named said, many small farmers are still struggling with losses from their wheat crop of 2024.; “Before prices [of wheat] crashed in 2024, many farmers had invested in that crop. The price crash meant that they were not able to recover their cost of inputs. Many farmers still owe money for things like fertilizers that they purchase for last year’s crop” he said.

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Syed Nadeem Qamar said, his organisation has decided to legally challenge the income tax on agricultural incomes on two related grounds. First, as farmers are incurring losses there is little scope for sizeable enough incomes especially for poorer farmers, to become eligible for paying an agricultural income tax. Second, beyond new legislation enacted by the provinces, reports from Pakistan’s provinces suggest that the mechanisms for assessment and collection of agricultural income tax remain weak.

Separately in Islamabad, a senior government official who also spoke to HUM News on condition that he will not be named said, the removal of the subsidy on wheat and imposition of an income tax on farm incomes, were both among conditions accepted by Pakistan for securing a USD seven billion loan from the IMF.

“Right now, it is not possible for the government to begin subsidizing the wheat crop or any other crop to improve the returns for farmers” said the government official.

The controversy surrounding the latest agriculture related news from Sindh, coincides with the destruction caused by excessive recent rainfall. Pakistan is suffering from the effect of climate change that has triggered unusual alterations in weather patterns, such as higher than previously recorded temperatures.