Domestic Terms of Trade in Pakistan : Implications for Agricultural Pricing and Taxation Policies

World Bank

Washington, DC

关键词: ACCOUNTING;    ADMINISTRATIVE COSTS;    ADVERSE EFFECT;    AGRICULTURAL COMMODITIES;    AGRICULTURAL COMMODITY;   

RP-ID  :  68404

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

In 2008 the Government of Pakistanagreed with the International Monetary Fund (IMF) toincrease the tax/Gross Domestic Product (GDP) ratio by 3.5percentage points over the medium term.This commitment hasrekindled the debate regarding the agricultural income tax.Advocates of an agricultural income tax argue that thesector remains protected by political interests, whileopponents to such a tax maintain that agriculture is alreadysubject to significant indirect taxation, mainly because ofprevailing price distortions in agricultural productmarkets. This paper reviews the literature on domestic termsof trade analysis in Pakistan and calculates an updated setof terms of trade indices for agriculture relative toindustry.The paper also discusses key issues with regardto the imposition of agricultural income tax in Pakistan,and uses simulation results from a Computable GeneralEquilibrium (CGE) model for the Pakistan economy to analyzethe potential effects of the imposition of an agriculturalincome tax on poverty and fiscal revenues. The resultssuggest that the domestic terms of trade have remainedunfavorable for Pakistan's agriculture during almostthe entire 2000-2009 period.Agriculture's terms oftrade declined from 2001-02 to 2003-04 before improving onlyslightly during the period from 2004-05 to 2006-07.As of2007 however, prices of agricultural commodities startedrising resulting in significant increases inagriculture's terms of trade.But in spite of thesubstantial increases in agricultural prices, the terms oftrade for agriculture, though on a rising trend, remainedmarginally unfavorable to the sector.