Economic Advisory Council (EAC), constituted by Prime Minister Imran Khan, has recommended to take away powers of collection of income tax on agriculture income from provinces and hand over to the federation. Prime Minister, Imran Khan had constituted 18-member Economic Advisory Council (EAC) to get advice from top economists on the country's economy. The concerned committee of the EAC has drafted its recommendations on fiscal and taxation policy issues.
EAC has also drafted recommendation on taxing income from agriculture. It recommended that the solution to this might lie in handing over the collection of income tax on agriculture income to the federation. The resultant tax collection in respect of each province should not form part of the divisible pool and can be directly transferred to the respective province. The provinces can still retain the constitutional right as well as policy decision making of the taxation of the agriculture income.
The integration of the taxation of all sources of income will result in reduction in administrative cost, simplification of procedures, increased documentation and fewer opportunities for tax evasion. It will also, at least in the short term, force smaller agriculturists to deal with new bureaucratic institution, impose higher tax cost on many agriculturists and extend pathologies of the existing federal tax administration to a new sector (although it will replace the problems with the provincial tax administration). Any such arrangement is also likely to face political resistance on account of principles of fiscal federalism, bureaucratic resistance from provincial tax administration and public resistance from those who are beneficiaries of existing low tax collection. However, in the long run, if Pakistan has to achieve its full income tax potential, one-fifth of the economy cannot remain hostage to a colonial era tax collection system, EAC' recommendation added.
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