2010年-世界发展银行全球_Domestic_Terms_of_Trade_in_Pakistan___Implications_for_Agricultural_Pricing_and_Taxation_Policies_39页_560kb

Summary of "Domestic Terms of Trade in Pakistan – Implications for Agricultural Pricing and Taxation Policies"

Core Content

This paper examines the domestic terms of trade for Pakistan's agricultural sector relative to industry and evaluates the potential implications of introducing an agricultural income tax on poverty and fiscal outcomes. It also reviews existing literature on the topic, emphasizing the methodological approaches used to estimate inter-sectoral terms of trade.

Main Views

• Terms of Trade Trends:
  The domestic terms of trade for Pakistan's agriculture have been largely unfavorable over the 2000-09 period. The index remained below 100 for most years, indicating that agricultural products were undervalued relative to industrial goods. There was a notable decline from 2001-02 to 2003-04, followed by a slight recovery until 2006-07, after which agricultural prices began to rise. However, even with these increases, the terms of trade for agriculture remained marginally unfavorable.

• Poverty and Economic Impact:
  A decline in agricultural terms of trade has a negative impact on rural poverty, which is significantly higher than urban poverty. During the period of declining terms of trade (1999-00 to 2005-06), agricultural production volume fell by 1.4%, while industrial output increased by 2.5%. The negative effect on rural poverty was more pronounced, with poverty headcount, gap, and severity all increasing. Conversely, during the period of improving terms of trade (2005-06 to 2007-08), the effects were largely reversed, with a reduction in rural poverty and an increase in urban poverty.

• Agricultural Income Tax Debate:
  The debate over introducing an agricultural income tax is fueled by differing perspectives. Advocates argue that the sector is politically protected, while opponents claim it is already heavily taxed through indirect means due to market distortions. The paper uses a Computable General Equilibrium (CGE) model to simulate the effects of such a tax.

Key Findings

• Taxation of Large Farmers:
  Imposing an income tax on large farmers (>50 acres) is found to be pro-poor, with a 6% tax reducing poverty by -0.02 percentage points and a 30% tax reducing it by nearly -0.5 percentage points. This is attributed to the fact that large farmers are fewer in number and have a lower initial poverty incidence compared to medium farmers.

• Taxation of Medium Farmers:
  A tax on medium farmers (12.5-50 acres) is not pro-poor and may even increase poverty. This is because medium farmers constitute a larger portion of the agricultural population and are more likely to be in poverty. However, taxing both large and medium farmers increases the tax base, potentially leading to social welfare gains if the additional revenues are used for public investments and poverty mitigation.

• CGE Model Insights:
  The CGE model simulations show that an increase in direct tax revenue from agriculture can lead to higher total savings in the economy, which are channeled into investments, particularly in the construction sector. This results in increased employment of both skilled and unskilled urban labor, offsetting the adverse effects of reduced agricultural output on rural poverty.

Methodology and Data

• The study uses weighted price indices and value-added indices to estimate inter-sectoral terms of trade.
• Data is sourced from the Social Accounting Matrix (SAM) and Pakistan Economic Survey, with the 2000-01 period serving as the base year.
• The model distinguishes between agricultural and industrial sectors, using Laspeyre's index to compute the terms of trade as the ratio of agricultural exports to industry and agricultural imports from industry.

Conclusion

• The terms of trade for agriculture have remained unfavorable, with only minor improvements in recent years.
• An agricultural income tax on large farmers can have a pro-poor effect, especially at higher tax rates.
• Taxing medium farmers is not pro-poor and may exacerbate poverty, but it increases the tax base.
• The CGE model suggests that higher tax revenues from agriculture can lead to increased savings and investment, particularly in the urban construction sector, which can help reduce urban poverty more significantly than the increase in rural poverty.
• Therefore, in the short run, taxing large farmers only appears to be the preferred option.

References to Supporting Materials

• Annex I: Provides detailed price data used in the analysis.
• Annex II: Contains the original and modified weights for the SAM.
• Annex III: Describes the CGE model used for simulations, including its structure and key parameters.