World Bank2013-02-212013-02-212010-11https://hdl.handle.net/10986/12448In 2008 the Government of Pakistan agreed with the International Monetary Fund (IMF) to increase the tax/Gross Domestic Product (GDP) ratio by 3.5 percentage points over the medium term. This commitment has rekindled the debate regarding the agricultural income tax. Advocates of an agricultural income tax argue that the sector remains protected by political interests, while opponents to such a tax maintain that agriculture is already subject to significant indirect taxation, mainly because of prevailing price distortions in agricultural product markets. This paper reviews the literature on domestic terms of trade analysis in Pakistan and calculates an updated set of terms of trade indices for agriculture relative to industry. The paper also discusses key issues with regard to the imposition of agricultural income tax in Pakistan, and uses simulation results from a Computable General Equilibrium (CGE) model for the Pakistan economy to analyze the potential effects of the imposition of an agricultural income tax on poverty and fiscal revenues. The results suggest that the domestic terms of trade have remained unfavorable for Pakistan's agriculture during almost the entire 2000-2009 period. Agriculture's terms of trade declined from 2001-02 to 2003-04 before improving only slightly during the period from 2004-05 to 2006-07. As of 2007 however, prices of agricultural commodities started rising resulting in significant increases in agriculture's terms of trade. But in spite of the substantial increases in agricultural prices, the terms of trade for agriculture, though on a rising trend, remained marginally unfavorable to the sector.en-USCC BY 3.0 IGOACCOUNTINGADMINISTRATIVE COSTSADVERSE EFFECTAGRICULTURAL COMMODITIESAGRICULTURAL COMMODITYAGRICULTURAL INCOMESAGRICULTURAL LANDAGRICULTURAL OUTPUTAGRICULTURAL POLICYAGRICULTURAL PRICESAGRICULTURAL PRODUCEAGRICULTURAL PRODUCTAGRICULTURAL PRODUCTIONAGRICULTURAL SECTORAGRICULTURAL SECTORSAGRICULTUREAVERAGE HOUSEHOLD INCOMEBASE YEARCOMMODITYCOMPETITIVENESSCONSUMER EXPENDITURECONSUMERSCONSUMPTION BASKETDECOMPOSABLE POVERTYDEFLATORSDEVELOPMENT ECONOMICSDEVELOPMENT STRATEGIESDISPOSABLE INCOMEDIVIDENDDIVIDEND INCOMEDIVIDENDSDOMESTIC MARKETDROUGHTECONOMIC STRUCTUREELASTICITYELASTICITY OF SUBSTITUTIONEQUIPMENTEXCHANGE RATEEXPORT MARKETEXPORT PRICE INDEXEXPORT SHAREEXPORTSFACTORS OF PRODUCTIONFARM LABORFARMERFARMERSFISCAL DEFICITFOOD ITEMSFOOD POLICYFOOD PRICEFOOD PRICESFOREIGN TRADEFRAUDGDPGOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURESGOVERNMENT REVENUEGOVERNMENT REVENUESGROWTH RATESHOUSEHOLD CONSUMPTIONHOUSEHOLD INCOMEHOUSEHOLD INCOMESHOUSEHOLD SAVINGSHOUSINGINCIDENCE OF POVERTYINCOMEINCOME DISTRIBUTIONINCOME SHARESINCOME TAXINDUSTRIALIZATIONINEQUALITYLAND HOLDINGSLANDHOLDINGSLANDLESS AGRICULTURAL WORKERSLANDOWNERSLIBERALIZATIONMILKMONETARY FUNDNATIONAL INCOMEOUTPUTSPER CAPITA CONSUMPTIONPER CAPITA INCOMEPOORPOOR FARMERSPOOR HOUSEHOLDPOOR HOUSEHOLDSPOVERTY GAPPOVERTY GAP INDEXPOVERTY HEADCOUNT RATEPOVERTY INCIDENCEPOVERTY INCREASEPOVERTY LINEPOVERTY MEASURESPOVERTY REDUCINGPOVERTY SEVERITYPRICE CHANGESPRICE CONTROLSPRICE DISTORTIONSPRICE INCREASESPRODUCT MARKETSPRODUCTION FUNCTIONPRODUCTION OF WHEATPRODUCTION STRUCTUREPUBLIC INVESTMENTSPURCHASING POWERRATES OF RETURNREAL INCOMEREMITTANCESRETURNRETURNSRURALRURAL AREASRURAL HOUSEHOLDSRURAL POPULATIONRURAL POPULATIONSRURAL POVERTYSAVINGSSKILLED WORKERSSMALL FARMSSTATE BANKSTRUCTURAL ADJUSTMENTTARIFF REVENUETAX COLLECTIONTAX POLICYTAX RATETAX RATESTAX REGIMESTAX REVENUESTAX STRUCTURETAXATIONTAXATION POLICIESTOTAL OUTPUTTRADE POLICIESTRADE SECTORURBAN REGIONSVALUE ADDEDVEGETABLESWARWEALTHWHOLESALE PRICE INDEXWHOLESALE PRICE INDICESWHOLESALE PRICESWorld Bank10.1596/12448