Agricultural tax system: provinces wouldn't brook interference from Centre

Provinces are not ready to accept what they term interference from the Centre in the existing agriculture taxation system and sought details of declared agricultural income from the Federal Board of Revenue (FBR). Sources told Business Recorder here on Tuesday that provinces have informed the Centre that presently there are two kinds of taxes on agriculture sector, namely tax on land and tax on net income.
The tax on net income is determined after deduction of all the taxes on inputs, labour cost and deprecation of machinery/equipment. A committee was constituted by the Prime Minister during the meeting of Council of Common Interest (CCI) under the chairmanship of Minister of Finance Dr Abdul Hafeez Shaikh to work out modalities in consultation with the provincial finance ministers to increase the tax collection from agriculture sector through effective enforcement at provincial level.
Sources said the provincial governments are unlikely to incorporate any measures in the forthcoming provincial budgets to empower the federal government for collection of agricultural income tax from 2011-2012. Sources said that the provinces were of the opinion that under the Constitution of 1973 agriculture tax is provincial domain and federal government should not interfere in this matter. Provinces can generate their own sources for collection of agricultural income tax. Centre has asked provinces to review their provincial laws for improvement in the collection and enforcement of the agricultural income tax.
Sources further said that the provinces have also asked the FBR to provide data of those persons, who have declared agricultural income in their income tax returns. The data available with the FBR should be shared with the provinces for obtaining details of the persons, who have declared agricultural income.
According to sources, the issues yet to be decided included possible increase in the rate of agriculture income tax, keeping agriculture income tax rate at uniform level in all four provinces, uniform assessment mechanism and tax collection strategy with maximum facilitation for the taxpayers of the agriculture sector. After attending the meeting, federal Finance Minister Dr Hafeez Shaikh said that the meeting discussed the ways and means for effectively improving the agriculture income tax collection.
Talking to media, Humayun Khan, Finance Minister Khyber Pakhtunkhwa was of the view that there should be one rate of tax, authority to collect taxes should reside with the provinces and KP would not like to empower federal government to collect this tax. He, however, said that increase in revenue was necessary for each province and some 1.9 million agriculture income tax had been collected in KP in 2009-10. He also said that KP was a war-affected area. There was, therefore, a reduced agriculture activity in the province.
Zulfiqar Khosa, Senior Minister Punjab informed the media that it was an initial meeting and no decision had been taken. He was of the view that proposals that had been submitted in the meeting would be brought to the notice of Chief Minister Punjab and issues would also be discussed in a provincial cabinet meeting. He also endorsed the proposal of one uniform rate of agricultural income tax in all provinces for proper collection of the levy. However, Dostain Jamaldini, Finance Secretary of Balochistan informed the media that there should be separate rate in each province keeping in view the state of agriculture sector in the province. He said that Balochistan had collected Rs 65 million agriculture income tax in 2009-10. He was also of the view that floods had badly damaged agriculture in the province and that farming community could not take further burden.