Farm income tax to be a federal
subject!
THE Central Board of Revenue has advised President General
Pervez Musharraf that agriculture income tax should be made
a federal subject as the provinces have failed to deliver,
with annual collection stagnant around Rs2 billion from a
sector which contributes over 22 per cent of the gross
domestic product(GDP). The landed gentry virtually gets away
without paying any income tax.
The
CBR reckons the first priority for widening the tax net
should go to improving agricultural income tax (AIT)
collection. The job should be entrusted to the CBR, either
by making AIT a federal subject or the CBR should be allowed
to collect the tax on behalf of the provinces.
A presentation on the latest CBR strategy was made to
President Pervez Musharraf when he visited the CBR House on
February 22. The objective is to increase the tax-to –GDP
from the present 10.5 per cent to about 15.5 per cent in the
next 10 years.
Insiders maintain that the president agreed to let the CBR
to prepare a blueprint for effective recovery of
agricultural income tax. The president is also believed to
have agreed to support a legislation to make the AIT as
federal subject. However, the assemblies are dominated by
big farmers who are expected to resist the move.
If empowered , the CBR reckons that it could initially
collect Rs60-70 billion from the farmers.
Over time, the figure would .go up.
The government has decided in principle to recover tax from
agriculture and the issue is expected to be finalised during
the next financial year. It will be followed by tax on
services, real estate and stock market.
The share of CBR in taxes in terms of tax-to-GDP ratio is
9.5 per cent while one per cent is that of provinces.
However, both are considered low by tax officials and
international donor agencies.
CBR Chairman Abdullah Yousuf has convinced the president
that unless all segments of society paid their due taxes,
the country could not progress and that time had come for
the government to take a "political decision" and enforce
levy of taxes on agriculture income which was consistently
being avoided by the landlords.
Meanwhile, the CBR chairman requested the president to let
his organisation first prepare a blueprint for recovery of
tax on agriculture income effectively. The president agreed
to enact a legislation to make agriculture -- currently a
provincial subject-— a federal discipline.
However, the president's "go-ahead signal" to the CBR
chairman for recovering tax on agriculture income has not
been well perceived by over 80 per cent of the legislators
sitting in the national and provincial assemblies.
Both the MNAs and the MPAs of the ruling and opposition
parties were believed to have reacted sharply to the
proposal. Some of them also met PML President Chaudhry
Shujaat Hussain and informed him about their concern over
the government's tentative decision.
The late Dr Mahboob ul Haq used to say that landlords earned
over Rs600 billion annually but did not pay even Rs1 billion
tax on their agriculture income.
Deputy chairman of the Planning Commission Dr Akram Sheikh
is also a supporter of tax on agriculture income. He said
that everybody should pay tax on his/her income and that the
state must recover it.
The CBR Chairman, when approached, confirmed that for the
first time in Pakistan's 60-year history there was a
realisation at the top level that agriculture income should
be taxed effectively.
"We have told the president that in the first place
agriculture income should be made a federal subject. And if
it is not possible at this stage, then the CBR should be
allowed to collect this tax on behalf of the provincial
governments," Mr Yousuf said.
He was of the view that initially the government could
collect Rs60-70 billion tax on agriculture income which
could gradually be increased. "Although this Rs60-70 billion
is still not enough, it is modest,” he said.
Currently, he regretted, less than Rs2 billion was collected
through tax on agriculture income which needed to be
increased. He said the agriculture sector accounted for 22
per cent of the GDP, but taxes coming from this sector were
very marginal. "There is a need to have certain equitable
and fair across-the-board tax dispensation in which all
sectors must pay their due taxes".
Similarly, he said, the high-level meeting agreed to impose
capital gains tax on property and recover adequate tax from
the stock market. Property, he said, was also a provincial
subject which needed to be made a federal concern. Then the
services sector, he said, must pay their taxes for GST
purposes.
Former director of the Pakistan Institute of Development
Economics (PIDE) Dr A. R. Kamal also supported tax on
agriculture income and said the government should introduce
a piece of legislation, declaring it a federal subject. The
major problem, he said, was in Punjab and Sindh where
agriculturists did not want to pay their due taxes on their
incomes.
TA substantial amount of revenue from tax on agriculture
income, Dr Kamal said, could be collected from Punjab and
Sindh for which the government should fulfil its
responsibilities. He termed the February 22 meeting a "good
beginning" in this direction and said if tentative decisions
were converted into hard decisions, the government could
collect sufficient resources to generate income and reduce
poverty.
Courtesy: The DAWN
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