Tax Exemption for Small Landholders; Address to the nation by Prime Minister Zulfikar Ali Bhutto broadcast and telecast on November 10, 1975

I am addressing tonight the toiling farmers of our land. For more than a century, the small landowner has groaned under a crushing burden. For all this time, his demand for a relief from this burden has been talked about, examined and then either forgotten or ignored. I am indeed proud to declare tonight that your Government is taking a bold decision to end a crying iniquity. Let me trace in brief the historical background of the problem.

It is well known that the small landowners generally live below the breadline. From official records it is clear that since 1920, our farmers have repeatedly pointed out the harshness of land revenue along with rates and cesses. However, the injustice of this imposition has been persistently disregarded by each and every government both before and after independence. The fiction was spun that land revenue was not a tax but a rent collected by the State by virtue of its over lordship of land. The big landowner was not bothered. It was not his problem. It was not his misery. The successive governments were not concerned because the small landowner was too weak to assert his position.

This is borne out by a narrative of developments. In the decade of the 30’s the elected representatives of the farm population obtained statutory safeguards against any arbitrary increase of land revenue at the time of settlement. Yet the root problem was left untouched. In Punjab, the Government of the day appointed in 1937 a Committee to devise a way of affording relief to the small landowners. The Committee recognized the moral justice of the demand but rejected it on administrative and financial grounds.

When land reforms were enacted in 1959, the issue was left to languish. In 1965, the Central Minister for Agriculture went so far as to announce the decision to exempt small landowners from the payment of land revenue. But so powerful was the influence of the vested interests that this decision, if ever it had been really taken, was never translated into action. Again in 1969, a proposal was made for exempting persons owning 5 acres or less. But, after having been mode, it was duly shelved.

For years, I have watched this long appalling neglect with pain and perplexity. My feeling in this matter of enormous importance was reflected in the Manifesto of the Pakistan People’s Party which states (and I quote);

“There are many peasants who possess land less than the subsistence unit and must, therefore, be regarded as a class from whom land revenue cannot be justifiably demanded.”

As you are all aware, the People’s Government addressed itself to the task of improving the lot of the farming community soon after it assumed office. I had wished to incorporate the principle laid down in the Party Manifesto in the land reforms plan announced on March 1st, 1972. But the matter required detailed consultations with experts and provincial governments and we could not delay agrarian reforms. Those reforms, you will recall, broke up the iniquitous concentration of landed wealth by reducing the ceiling by 70 per cent, resuming the excess areas without compensation and transferring them to tenants and other landless persons without cost. At the same time, the arbitrary and capricious ejectment of tenants was prohibited; the tax burden was shifted to landowners; the supply of seeds became the landowners’ obligation and all illegal exactions and ‘Begar’ were stopped. However, one may look at them, from whatever angle; there can be no doubt that these reforms restored dignity to our rural masses.

Yet the issue of the imposition of revenue on the small landowners, which was uppermost in my mind, became a subject matter of protracted discussion between the Federal and the Provincial Governments. Experts on both sides projected the some old arguments with ingenuity. Divergent views were expressed, with force, at Inter-Provincial Coordination Conferences. The argument was advanced that a scheme for the exemption of small landowners from land revenue was beyond both our administrative means and financial resources. I patiently listened to all these views but I must candidly state that I remained unconvinced. Therefore, with the concurrence of the Provincial Governments, we have finally decided to unravel a tangled skein and not to let this issue remain unresolved any more.

My fellow citizens: It gives me the greatest pleasure tonight of conveying the decision to the small landowners of Pakistan in respect of their historical demand. With effect from the Rabi crop of 1975-76, small landowners owning up to 12 acres of irrigated land or 25 acres of unirrigated land shall be exempted from the payment of land revenue, local rates, development cess and all cesses related to land revenue.

I am very happy that it has fallen to the lot of the Pakistan People’s Party Government to remove an iniquity which originated since before the time of Mughals, which was reinforced by colonial rule and which persisted through twenty-eight years of our independence.

Let me tell you that this relief means in concrete terms. From now onwards, more than 85 percent of the landowners stand exempted from payment of land revenue, local rates and cesses. The financial implications need hardly to be emphasized. Plainly, the decision will entail a substantial loss of Government revenue at a time when we need every penny we can spare for our development. Your Government does not have any surplus which would wipe out this loss. Nor can it afford to let our development efforts be retarded. How do we, therefore, meet the deficit?

I have been giving anxious thought to this question. As I said before, the just demand of the small landowners was rejected time and again on financial grounds. But it would be irresponsible if we rendered justice without finding concrete means of meeting its financial cost. In consultation with the Provincial Governments, therefore, it has been decided to make up the loss by increasing the land revenue, local rotes and cesses of the more privileged landowners.

But while this principle of compensation suggested itself easily, its concrete application was not an uncomplicated affair. We could not agree to raise the imposition on those who own more than the exempted area announced by me but not more than 25 acres of irrigated land or 50 acres of unirrigated land. It is obvious that they are not affluent enough to bear additional taxation. This class which comprises a sizeable proportion of landowners will, therefore, continue to pay land revenue and related rates and cesses at the present rates. However, landowners having larger areas earn better incomes, and in accordance with our established policy of a just distribution of both privileges and sacrifice we have come to the conclusion that the loss in each province should, as for as possible, be made good by them. But a uniform increase in the rate of land revenue payable by persons owning more than 25 acres of irrigated land and 50 acres of unirrigated land would be inequitable and also contrary to the principle of progressivity in agricultural taxation,

We have had, therefore, to evolve a scheme free from such defects. Accordingly, it has been decided that with effect from Rabi 1975-76;

Firstly, the existing rates of land revenue, local rates and cesses for persons owning land more than 25 and up to 50 acres of irrigated land or more than 50 and up to 100 acres of unirrigated land should be increased by 50 per cent; and

Secondly, these rates should be increased by 100 per cent in case of persons owning more than 50 acres of irrigated land or 100 acres of unirrigated land.

It must be clarified here that in case of any person having irrigated and unirrigated land, two acres of unirrigated land will be reckoned as equivalent to one acre of irrigated land. It is also understood that income tax on the landowners who are liable to it will now be fixed on the basis of the enhanced land revenue.

It is evident that this graduated increase of land revenue in accordance with the size of the holdings is designed to apportion a national burden equitably. The big landowners cannot be oblivious of the earnest effort of our Government, in the interest of raising our agricultural production, to ensure for them an adequate return from the labor and capital invested by them. They have been released from the crippling effects of those devices and contrivances, including an iniquitous exchange rate, which curtailed their legitimate earnings. It is, therefore, only fair to expect them to accept the Government’s decision in good faith.

The date of determination of the area of land held by a person for obtaining exemption or for being liable to additional rates shall be today i.e. 10th November, 1975. It is not feasible to give it retrospective effect as that would land us in endless administrative difficulties.

I have issued a clear directive that a water-tight system should be adopted by all the provinces. Let everyone understand that no evasions, whether on the part of the administrative staff or on that of the landowners concerned, and no deviations from the principle which I have described, will escape without severe punishment.

Soon the Chief Minister of each Province will provide you with the details of our scheme, its benefits for t`-e poor sections of the farming community and the manner in which this major reform will be implemented.

My fellow citizens, tonight I feel greatly relieved and thankful to Allah Almighty that I have now fulfilled the most significant promise made to the agrarian community. Starting from the land reforms announced only two months after our assumption of office and working through the many administrative steps we have taken since to protect and render justice to tenants, the scheme we had in view has been completed for the time being. We will not let anyone prevent this scheme or to defraud the Government of its revenue.

Finally, I turn to the toiling farmers of our country. Tonight they have heard a decision which is unprecedented not only in Pakistan but in the history of the subcontinent. It should, therefore, be a proud day for them. They can now make it prouder by resolving that they will work hard and produce more. Only thus will the full economic potential of this fertile and cherished land of ours be fully realized. Only thus can we improve the quality of our life. Only thus can we construct the edifice of a just society, of a stable nation whose solidarity can be threatened by no force on earth. You gave a mandate to my Party and I have the honor to fulfill yet another important pledge to the people of Pakistan. May they prosper, may their children be happy. This has been my prayer and this has been my struggle.