ISLAMABAD: Pakistan Muslim League-Nawaz (PML-N) supports imposition of Agriculture Income Tax (AIT) and reforms in the existing laws to improve documentation and increase provincial revenue collection. A key member of PML-N's economic team Sartaj Aziz told Business Recorder on Tuesday that agriculture income tax was entirely a provincial subject and the issue should be referred to the Council of Common Interest (CCI) to make the tax more comprehensive.
He said that imposition of AIT would help generate about Rs 20 billion per annum but the issue was very complicated as agriculture sector heavily depended on weather conditions and the revenue collection from this sector was not certain. He claimed that in Punjab about Rs 1 billion was being collected annually on account of AIT, but in other provinces there was no collection. "Imposition of agriculture tax is a part of PML-N's manifesto and the party has proposed that 50 percent of revenue generated through AIT must be spent in the district from where it is collected," he said adding that the objective of this proposal was to increase spending on agricultural development.
A senior official of the Ministry of National Food Security and Research said that in 2012 an initiative was taken on the issue, when legislators brought the issue to the parliament during the budget debate but later no steps were taken in this regard. He said that three provinces of the country had so far not made any significant legislation on AIT.
According to declarations before the Election Commission of Pakistan (ECP), majority of the rich landlords, especially in Punjab and Sindh, do not pay any personal tax. The Punjab Agricultural Income Tax Act 1997, which was land based, was amended in 2001 to income based. The amendment stipulated that the tax would be land or income based depending on which ever is higher. The rates provided in the First Schedule to this Act stipulated that if ownership is up to 12.5 acres there will be no tax, where it is more than 12.5 but less than 25 acres, tax would be levied at the rate of Rs 150 per acre and land beyond 25 acres would be taxed at the rate of Rs 250 per acre.
The 2001 amendment allowed exemption from tax of income up to Rs 80,000; rate of tax where income does not exceed Rs 100,000 is 5 percent of total income; where income exceeds Rs 100,000 but does not exceed Rs 200,000 tax would be payable at Rs 5,000 plus 7.5 percent of amount exceeding Rs 100,000; where income exceeds Rs 200,000 but not Rs 300,000, it is Rs 12,500 plus 10 percent of amount exceeding Rs 200,000 and in the last slab where total income exceeds Rs 300,000 it is Rs 22,500 plus 15 percent of the amount exceeding Rs 300,000.
Agri-Forum Pakistan Chairman Ibrahim Mughal while opposing AIT said that the sector was already paying around 22 different taxes ranging from General Sales Tax (GST) to market tax. A senior official of the Federal Board of Revenue on the condition of anonymity said that the government was deducting income tax from his income before paying him monthly salary and still he was paying tax on the purchase of each item. He added that the government needed to impose AIT.
The sector is contributing an estimated Rs 240 billion to the national kitty in the shape of different taxes imposed on agriculture including General Sales Tax (GST), which is imposed on almost all the necessary farm inputs like seeds, pesticides, farm machinery, electricity and diesel.
Only collection of GST from the farm inputs is providing the government about Rs 100 billion. Further, farmers with above 12.5 acres of land holdings are also paying income tax at a flat rate of Rs 50 per acre in Rabi crop season, Rs 80 per acre on kharif crops and Rs 150 per acre on orchids. Re1 is imposed as Cess on per 40kg of sugarcane (keeping in view Pakistan's annual cane production of 60 million tons the government is collecting about 1.6 billion in shape of cane Cess), cotton seed and cotton seed oil taxes are also imposed on the farmers. Farmers are also paying tehsil, district and provincial taxes which include Mandi tax, abyana, malya road tax and a 10 percent commission to Arhatis.
"We need to regularise our agriculture markets first and after that we should impose direct taxes on the farm products as middleman or Arhatis are charging the growers 10 percent commission," said former Agriculture Development Commissioner (ADC) of Pakistan. The regularisation of market places by the government would help generate billions of rupees in form of taxes, he added.
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