Hear me out: this report is surprisingly compelling. Even as agriculture’s share of economic activity has declined in developed economies, those governments continue to support the sector through a layered suite of tax preferences, direct subsidies, and trade protections. The U.S. political economy of these benefits is deep and well-traveled.
Across countries, the precise structure of agricultural policy is complex, intersecting issues as diverse as climate mitigation and foreign relations. Finding a holistic perspective is hard, and that’s precisely what researchers at the International Monetary Fund provide in a new working paper. And they find remarkable similarities between developing and developed countries.
The takeaways, for the “stylized facts” of agricultural policy: in the aggregate, domestic tax expenditures likely exceed direct subsidies to the sector, while food-security concerns help explain the typical dynamic of reduced consumption taxes on food, combined with above-average tariffs on food imports. Link, abstract, and excerpt, below the fold.
Maria Delgado Coelho, Thornton Matheson, Mengxi Xie & Yomna Gaafar, Global Taxation of Agriculture and Forestry, IMF Working Paper 26/200 (Sept. 2026):
Across the globe, the agricultural sector is often the target of special fiscal policies, including tax breaks and subsidies, to promote food security and rural economic stimulus and simplify administration. Increasingly, the sector is also subject to sector-specific taxes aimed at curbing environmental externalities. While there is a large literature on agricultural subsidies and tariff policy, there are few cross-country studies of domestic agricultural tax policies. To fill that gap, we built a detailed inventory of almost 950 tax policy measures specific to agriculture and forestry—both tax concessions and sectoral taxes—for 89 developed and developing countries. We use those data to estimate forgone revenue associated with agricultural income and general consumption tax expenditures and find that agricultural tax expenditures likely exceed agricultural subsidies. We also compare tariffs on food and agricultural inputs to those on other products. We find that while agricultural inputs are generally subject to below-average tariffs, foodstuffs are generally subject to above average tariffs, such that agricultural tariff policy typically raises net revenue.
From the conclusion:
Trade policies respecting agricultural goods and inputs are similar across income groups and regions: all countries tax food imports more heavily than average while relieving import duty on agricultural inputs. Since the former effect is larger, most countries have positive net agricultural trade revenue contributions that partly offset their agricultural domestic [tax expenditures]. . . .
By showing the most common tax policies applied to the agricultural sector, the [authors’ database] suggests certain “stylized facts” of agricultural tax policy that should facilitate policy modeling and analysis. A common feature of most countries’ fiscal system is the combination of elevated customs duties and VAT/GST concessions for foodstuffs. This combination suggests that food security is a primary motivation driving agricultural taxation. Reduced VAT/GST rates on foods make them more affordable, while elevated customs duties—though raising the domestic price of food—favor domestic production over imports. While affordability of basic necessities to the poor is usually of greatest policy concern, households at all income levels benefit from reduced food prices.
