AVN 64.88 Decreased By ▼ -0.12 (-0.18%)
BAFL 31.00 Decreased By ▼ -0.15 (-0.48%)
BOP 4.72 Increased By ▲ 0.01 (0.21%)
CNERGY 3.87 Decreased By ▼ -0.01 (-0.26%)
DFML 13.55 Decreased By ▼ -0.15 (-1.09%)
DGKC 41.69 Increased By ▲ 0.42 (1.02%)
EPCL 46.65 Decreased By ▼ -0.04 (-0.09%)
FCCL 11.32 Decreased By ▼ -0.10 (-0.88%)
FFL 5.03 Decreased By ▼ -0.01 (-0.2%)
FLYNG 5.76 Decreased By ▼ -0.06 (-1.03%)
GGL 9.96 Increased By ▲ 0.01 (0.1%)
HUBC 65.20 Increased By ▲ 1.10 (1.72%)
HUMNL 5.75 Increased By ▲ 0.10 (1.77%)
KAPCO 28.00 Increased By ▲ 0.20 (0.72%)
KEL 2.16 Increased By ▲ 0.03 (1.41%)
LOTCHEM 24.64 Increased By ▲ 0.34 (1.4%)
MLCF 21.45 Increased By ▲ 0.05 (0.23%)
NETSOL 84.50 Increased By ▲ 0.30 (0.36%)
OGDC 87.59 Decreased By ▼ -0.35 (-0.4%)
PAEL 11.01 Increased By ▲ 0.11 (1.01%)
PIBTL 4.20 Increased By ▲ 0.02 (0.48%)
PPL 76.90 Decreased By ▼ -0.80 (-1.03%)
PRL 13.58 Decreased By ▼ -0.04 (-0.29%)
SILK 0.89 No Change ▼ 0.00 (0%)
SNGP 41.83 Decreased By ▼ -0.10 (-0.24%)
TELE 5.90 Increased By ▲ 0.03 (0.51%)
TPLP 15.81 Increased By ▲ 0.03 (0.19%)
TRG 111.73 Decreased By ▼ -0.57 (-0.51%)
UNITY 14.00 Increased By ▲ 0.05 (0.36%)
WTL 1.13 No Change ▼ 0.00 (0%)
BR100 4,060 Increased By 12.1 (0.3%)
BR30 14,488 Increased By 21.6 (0.15%)
KSE100 40,723 Increased By 49.5 (0.12%)
KSE30 15,243 Increased By 52.5 (0.35%)
Follow us

EDITORIAL: It’s about time the government turned its attention to milking some of the long-overdue income tax on agriculture that the country’s landlords, big and small, have been evading since forever. The expansionary budget, the need to avert a Balance of Payments (BoP) crisis and especially this fiscal year’s ambitious revenue target all beckon the government to turn its attention to extracting due taxes from our feudal lords, who have been allowed a constitutional window to keep their tax money with themselves because they have dominated parliament practically since Independence.

Since agriculture is a provincial subject and the federal government is unable to tax it, it’s come up with a rather smart idea of getting the Federal Board of Revenue (FBR) to offer provinces, in the spirit of cooperation of course, to issue system-generated notices to taxpayers, who declare agriculture income in the federal income tax returns, to duly discharge their tax liabilities with the provinces. As things stand, taxpayers can use one of two ways to pay income tax on agriculture to provincial governments. One is the book keeping method, where expenditure is subtracted from income, which is then taxed. And the other is the indirect/presumptive method of estimating tax liability by calculating the area under cultivation, then calculating the per-acre yield, then fixing a rate to be paid as agriculture income tax.

It is no surprise that almost all landlords prefer the latter because it involves no audits or assessment proceedings, just per-acre taxation. And they can wave it in FBR’s face whenever it comes to questioning about the source(s) of income that enables all the spending. But FBR’s new offer of sharing their declared incomes, which can be cross-checked with the taxes paid, ought to bring this difference into sharp focus. That this thought process started after it came to light that slightly more than 161,000 filers in the country declared Rs 79 billion in agriculture income in tax year 2020 and claimed exemption shows that the government has a very good idea of where it is starting from.

It should also know then that this is not the first time that some administration has felt excited about revolutionising tax collection, drawing the fair share from agriculture, and also, for once, meeting the revenue target. Back in 2013 also the FBR introduced an amendment to Section 111 of the Income Tax Ordinance 2001 to crack down on all those who played the agriculture card to evade taxes. But once all the noise was made the Board did not take any further action and landlords have continued to hoodwink the system.

Regardless of how quickly the government follows through on this initiative - or whether it does at all - it is at least good for strengthening the case that provincial governments should change their procedures and insist that agriculture income be taxed in the normal way by presenting accounts instead of deliberately allowing indirect provisions like a per-acre fixed amount. There’s no doubt that Finance Minister Shaukat Tarin is watching this very closely. Everything he has staked on the expansionary budget ultimately rests on the FBR’s ability to increase its revenue collection; and that too rather quickly. After all, he’s promised the IMF (International Monetary Fund) that the first quarter’s numbers will show a robust growth in tax collection, and the annual target of Rs 5.829 trillion will look a lot more achievable even without additional taxes.

This matter is now going to test the government’s resolve. There’s a very good chance, surely, that the first wave of resistance it will face will come from within the government, perhaps from the cabinet itself. It’s for a reason, after all, that some kinds of reforms never get off the ground in Pakistan. And this one is about as high on that list as any other. Either way, it will not be long before tax authorities can see for themselves how this is turning out.

Copyright Business Recorder, 2021

Comments

Comments are closed.

Taxing agri income

Intra-day update: rupee maintains positive momentum against US dollar

Fitch says PKR to further weaken

Country braces for fuel shortages?

IMF revises GDP growth projections downward

Govt plans to convert Rs800bn PHL debt into public debt

Former CM Parvez Elahi claims his residence raided by police

Nepra FCA decision: Power Div proposes revision

KE, Discos: Nepra approves negative tariff adjustments

Jul-Dec: govt has borrowed $5.595bn

Paracetamol: govt to allow increase in price