That elusive agriculture tax

It was the same old story of obfuscation regarding the agriculture tax implementation at the National Finance Commission meeting. According to a Business Recorder report, Federal Minister for Finance Dr Hafeez Sheikh expressed concern over the provinces' failure to effectively tax the agriculture sector to contribute its share towards enhancing the country's dismal tax-to-GDP ratio. Sindh Finance Minister Murad Ali Shah informed the meeting that this year his province's agriculture tax collection remained low because of the floods. He added that the government had prepared a revised law on agriculture income tax, which is being circulated among stakeholders for comments, and that it would soon be introduced in the provincial assembly. For his part, Kamran Michael, finance minister of the province with the biggest potential to raise revenue from agricultural production said the Punjab government had collected Rs 800 million from the sector. It is unclear whether he mentioned the figure as an achievement or an underachievement. Though given the sector's potential, this is peanuts. The sad reality is that rich landowners in all the provinces are not paying their dues to the state. That they do not because the required law is not in place, but despite the law. As it is, governments both in the provinces and at the Centre are dominated by the landed gentry, who use their influence to stay out of the tax net. Hence is missing the governmental will to take necessary steps to ensure compliance. Consequently, the implementation machinery remains both inefficient and ineffective. Sindh now says it is in the process of introducing reform. In Punjab, about three years ago, the provincial board of revenue added the position of member agriculture income tax. Yet after what the province's finance minister had to report at the NFC meeting, it is plain that a stronger determination is required to make the privileged land-owning class pay its taxes. While federal finance minister's indignation on the issue is understandable, it also reveals duality of approach in dealing with a similar subject: the provinces are expected to increase agriculture tax collection yet they are told not to collect sales tax. The present government takes credit, deservedly so, for enacting the 18th Constitutional Amendment which grants substantial autonomy to the provinces. But it seems to want to take away with the left hand what the right hand gave, in insisting on using its machinery for sales tax collection in the provinces. It needs to make judicious review of that decision, and apply the same criterion as it does in the case of agriculture tax, letting the provinces exercise a measure of self-sufficiency in benefiting from their respective resources. Copyright Business Recorder, 2012