LAHORE: Renowned tax expert Dr Ikramul Haq has proposed transferring the taxation of agricultural income to the federal government and restoring to the provinces the sales tax on goods that was withdrawn after the independence.
Talking exclusively to the Business Recorder, he said this situation is a major contributor to many of Pakistan’s economic problems as it concentrates resources and powers in the hands of privileged classes who, in turn, support the corrupt government officials because they safeguard their interests. If Pakistan aims to overcome these challenges, he stressed, this entrenched partnership needs to be dismantled.
According to him, both the federal government and provincial authorities appear unwilling to impose income tax on the agricultural income of large landlords due to their significant political influence. These landlords, who hold sway in politics and assemblies, are a formidable force that can potentially remove any government from power if they attempt to impose such taxes as mandated by the Constitution.
Dr Haq said this situation is affecting agricultural production and GDP negatively as evident in the need to import millions of cotton bales. It is crucial for both federal and provincial governments to address these issues and prioritize the welfare of the poor and vulnerable farmers.
The federal government has never collected any agricultural income tax from the areas under its control from the rich and mighty owners of large farms and property tax on palatial houses/bungalows.
Today, he added, amid the most challenging financial circumstances, poor and destitute farmers are burdened with an 18% sales tax, which also extends to goods, inputs and implements used for agriculture, further pushing them into poverty.
The imposition of high rates of indirect taxes has pushed many people in rural areas below the poverty line. It is concerning that these issues do not seem to be a priority for the federal and provincial governments, while rich landlords and absent landowners who rent out their plantations for substantial sums continue to avoid paying taxes on their agricultural income.
In the previous fiscal year, he said, all provincial governments accumulatively collected Rs2.4 billion as agricultural income tax, though its national potential could be up to Rs. 800 billion, as per various research studies, if the agricultural income tax was imposed in accordance with the Constitution. Proper collection of this tax by the provinces could have significantly reduced the federation’s overall fiscal deficit besides improving the pathetic tax-to-GDP ratio of just 9.2 percent.
Copyright Business Recorder, 2024