Sindh leads other provinces in own-source revenue mobilisation, particularly through its tax authority’s effective collection of sales tax on services. However, its fiscal autonomy remains constrained by structural limitations and continued dependence on often-delayed federal transfers.
The government of Chief Minister Murad Ali Shah recently enacted the Sindh Agriculture Income Tax Act, 2025, aligning agriculture income tax (AIT) rates with federal individual and corporate tax rates, as well as with those of other provinces. Despite this legislative effort, actual revenue collection from agriculture income in FY25 remains modest, reportedly under Rs2 billion.
“We don’t expect a major spike in AIT collection this year,” said an official familiar with the matter. “The SRB [Sindh Revenue Board] is still in the process of establishing systems to effectively administer this tax. The sharp contrast between the old and new rates may come as a shock to many taxpayers, potentially triggering resistance to compliance. Moreover, the sector is already under considerable stress due to persistent water scarcity and the abolition of the support price system for crops.”
“A clearer picture of AIT’s impact on provincial revenues will emerge once net agricultural income is assessed and declared by agriculturists in September this year,” remarked a senior board member of the SRB board.
Despite performing relatively better than other provinces and showing steady improvement in revenue, Sindh’s own-source revenues account for barely 12-15pc of its total budget
Realising its full revenue potential will require Sindh to broaden its tax base further, strengthening enforcement through automation and technological upgrades, consolidating multiple tax collection agencies and expanding non-tax revenue streams.
Potential non-tax revenue sources include royalties from natural resources such as oil, gas, coal and minerals; income from land and property through rents, land transfer fees and mutation charges; administrative fees and fines; dividends and profits on public investments; user charges for public utilities and hospital and education fees in government-run institutions; and licenses and permits.
Despite performing relatively better than other provinces and showing steady improvement in revenue collection since the Eighteenth Constitutional Amendment in 2010, Sindh’s own-source revenues typically account for barely 12 to 15 per cent of its total budget. The remainder is covered by federal transfers under the National Finance Commission award. In its 2024-25 budget of Rs3.05 trillion Sindh aimed to mobilise Rs450bn (15pc) through local sources.
Sindh has three primary revenue collection agencies, each with a clearly defined operational domain: the SRB, the Board of Revenue (BOR), and the Excise and Taxation Department.
Established in 2011, the SRB is the province’s leading tax authority. With a lean staff of around 360 employees, it relies heavily on automation to facilitate taxpayers’ compliance and curb chances of corruption by minimising physical interaction between taxpayers and tax collectors. The SRB is responsible for collecting sales tax on services, the Workers Welfare Fund and the Workers Profit Participation Fund. Following the enactment of the Agriculture Income Tax Law in 2024, it has also been tasked with the collection of AIT.
The BOR, with a workforce of approximately 20,000, manages land records across the province and collects stamp duty on property transactions along with registration fees.
The Excise and Taxation Department, employing around 16,000 staff, is responsible for collecting various levies, including import/export duties, infrastructure development cess, motor vehicle tax, license fees and other related charges.
According to reliable sources, the SRB now accounts for approximately 65pc of the province’s own-source revenues, BOR 10pc and excise and taxation 25pc. Since its inception in 2011, SRB has recorded an average annual growth rate of over 20pc. From Rs25bn in its first year, collection rose to Rs237bn in FY24. For the current fiscal year (2024-25), the provincial government set an ambitious target of Rs350bn collection by the SRB. However, the key tax body is expected to fall short by Rs50bn, with projected collections reaching Rs300bn by the year end.
Explaining the shortfall, Dr Wasif Ali Memon, Chairman SBR, stated in an exclusive comment, “While the SRB is on course to collect Rs300bn, reflecting a 27pc growth over last year’s Rs237bn, this still represents a shortfall of Rs50bn against the assigned target. However, this gap must be viewed in context.
“Inflation, which significantly impacts ad valorem taxation, has declined sharply from 23.4pc in FY24 to just 5.1pc in FY25. Moreover, the broader economic outlook has weakened, with GDP growth projections revised downward from 3.2pc to 2.6pc (as per the IMF), directly affecting the service sector. Accordingly, increased litigation in various cases has hindered both enforcement and levy of sales tax on services.
He also noted that the Federal Board of Revenue has similarly revised its own revenue target downward, from Rs12.97tr to Rs12.35tr, reflecting the same macroeconomic constraints.
“Agricultural income tax has long been viewed as a lucrative source of revenue that has not only been virtually beyond the tax net unfairly but also seen as a viable avenue used by tax avoiders to park income from other endeavours. Under the IMF’s tutelage all provinces have promulgated new legislation to remove a major anomaly in the taxation regime. It’s a step in the right direction. The success in terms of revenue generation, however, will depend on multiple factors but most of all on the serious intent and efforts of provincial governments,” commented an analyst.
Published in Dawn, The Business and Finance Weekly, May 26th, 2025
