Revenue Estimates for a Crop-Specific Agricultural Tax

This paper calculates per hectare rates of levy for a land-based crop-specific agricultural tax on eight major field crops, based on published Cost of Cultivation data, now available at state-level for the nineties but with uneven coverage across states. The eight crops are paddy, wheat, groundnut, rape/mustardseed, sugarcane, cotton, potato and onion. Clearly, any reconfiguration of input subsidies presently available to agriculture will alter the taxable surplus parameters and levy rates estimated, but the method used is of perfectly general applicability. The state-level rates of levy calculated for the year 1996-97 yield an estimated tax revenue of Rs 500 crore, around 80 per cent of aggregate land revenue collected that year from agricultural land. The levy is envisaged for panchayat rather than state-level, with jurisdictional retention for infrastructure improvements within agriculture. District-level rates of levy, with taxable surplus parameters adjusted for crop yield variations across districts, are calculated for four selected states: Andhra, Punjab, Rajasthan and West Bengal. Revenue additionality at panchayat level as a per cent of own revenue collections, aggregating across all panchayat tiers, ranges between 30 per cent in Andhra, and 201 per cent for West Bengal.