Netting agriculture tax

Recently, the Finance Minister critiqued the provinces for minuscule tax collection from the agriculture sector towards the national kitty. The sector accounts for almost 21 percent of the countrys GDP and it provides employment to nearly 45 percent of the population. This is a matter of grave concern.
Feudal lords and agriculturists enjoy significant lobbying power in the parliament, which has enabled them to avert the effective levy of Agriculture Income Tax (AIT) over the past decades. Bearing in mind, since 1959 the government commissions that have reviewed AIT out of the nine only two have endorsed it, while seven have voted against it.
Ironically, the salaried class is paying taxes that are regressive in nature and the government is continually putting more burdens on them due to flaws in the existing tax system.
Talking to BR Research, a retired FBR official noted that the Finance Minister had stated before the Senate Standing Committee on Finance that provinces were not ready to allow the Federal Government to impose or collect AIT. In the 7th NFC award, provinces made a commitment in FY09 that they would take effective steps for increased revenue collection through agriculture to increase tax-to-GDP ratio to 15 percent by FY15. The ratio has subsequently fallen below 10 percent.
Recently, the Punjab government fared to collect only Rs830 million on this account against the target of Rs2.01 billion while Sindh managed to collect only Rs426.5 million. But, that is still peanuts compared to the agriculture income that landed gentry makes.
In the freshly-announced provincial budgets, it is fascinating to note that the agriculture sector has yet again been spared from AIT. The PML-N has been in government in the Punjab for over six years now. Despite the need to reduce fiscal deficits, it has been unable to levy a farm income tax. Still the same AIT rate applies on agrarians having more than 12.5 acres of land that was fixed in 1997.
Sindh has been subjected to the same syndrome as Punjab as it fails to have the courage to suggest increasing AIT. This shows the extent of enormous political and administrative control of agriculture lobby in foiling the provincial governments from using their authority to effectively impose AIT and its compliance. However, the Khyber-Pakhtunkhwa budget has proposed a levy of five percent to 17.5 percent slabs of AIT on farmers.
The agriculture income tax is an essential direct tax for the provinces. The government cannot boost its financial resources without bringing the agriculture segment into the tax net. So, improving AIT collection is a necessity for overcoming the economic crisis. Hence, provincial governments ought to get their act together.