Tax on agricultural income: Punjab government sets Rs 927.189 million target for 2011-12

The Punjab government has set an ambitious recovery target of Rs 927.189 million for 2011-12 under the head of 'Tax on Agriculture Income', as it has already failed to collect current fiscal year target of Rs 1.2 billion, revised to 772.657 million during the year.
The downward trend in collection of agri income tax has led to 4.04 percent cut in share of this tax under Budget Estimate 2011-12 against share of 6.75 percent in direct taxes recorded in Budget Estimate 2010-11. Agriculture experts believe that major reason of downward trend in revenue collection from agri income tax is that the base of this levy remained static, apart from decline in the cultivated area, liable to this tax.
As per budget document, Agricultural Income Tax (AIT) was originally envisaged as a tax on income from agricultural activities, but for the sake of convenience it is also being collected in the form of a land tax with a fixed levy per acre. In its present form, Agricultural Income Tax is being levied in two modes: one is the Land Tax levied on land holdings at fixed rates per acre (separately for irrigated and non-irrigated cultivated lands); and the other, introduced in the year 2000, is on agricultural income. All income from agriculture above Rs 80,000 per year is subject to tax.
It may be noted that Agricultural Income Tax is levied on land holdings of above 121/2 or 25 acres for irrigated and non-irrigated cultivated land, respectively. Sources claimed that the provincial government did not want to burden the agriculture sector by levying more taxes.
As per budget document, growth of 20 percent in tax revenue and 5-6 percent in non-tax revenue has been witnessed in financial year 2010-11 in comparison to the actual revenue realisation for financial year 2009-10. It may be noted that in the system of fiscal federalism the province is largely dependent on transfers from the federal government. While greater degree of resource transfer was anticipated with an increase in the provincial share under 7th NFC Award, the actual realisation of revenue resources during the year from the Federal Divisible Pool has been appreciably less than anticipated.
With the passage of 18th Constitutional Amendment Act 2010 in the Constitution and the omission of Concurrent Legislative list, 47 new subjects have been transferred to the provinces. This development in itself presents a formidable challenge for the province as transfer of these functions is likely to intensify the spending pressures on the provincial government without the corresponding resource transfer by the federal government.
Official sources claimed that the Punjab budget for the FY 2011-12 has been prepared in a manner which, besides ensuring macroeconomic stability, would provide a platform for growth, job creation and improvement in quality of life of the ordinary people.
Emphasis in the development spending would be to promote growth and enhance productivity through targeted employment schemes; provide basic amenities for general public; create new physical infrastructure; develop agriculture with special focus on small farmers; launch skill development schemes; expand and improve the coverage and quality of health services and promote education through a special emphasis on technical education.