Punjab government urged to collect agriculture tax on net income basis

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for the financial year 2020-21 has urged the Punjab government to collect the agriculture tax on net income basis instead of landholding basis.
At present, the tax is payable on 'landholding' or 'net income' whichever is higher. However, the manner of determination of net income is complicated, and, in almost 100 percent of the cases, tax is received on a landholding basis. This discourages taxation on a net income basis. Therefore, taxability of income on landholding should be replaced with 'net income' basis.
The OICCI wants the Punjab government to introduce an advance tax on the sale of agriculture produce such as sugarcane, wheat, cotton which should be adjustable against the income tax payable on a net income basis.
There are only around 10 to 15 agencies and enterprises which acquire such crops. The advance tax should be adjustable against income tax payable on net income basis. Rates of withholding and the threshold for the same should be aligned with other products - for example any payment exceeding Rs 25,000 should be subject to advance tax at the rate of 1 to 3 percent as the case may be.
The federal taxation system may be used for such collection on behalf of the provincial government in the same manner as is being done in other cases by the provincial governments.
All persons holding land should obtain PTN (provincial tax number) like NTM maintained by the Federal Board of Revenue or in case of individuals CNIC (computerized national identity card) number can be the PTN. The definition of agriculture income should be amended to include all agriculture activities like non-corporate dairy farming and poultry.
According to the proposals, the rent income for the use of agricultural land should be subject to the same rate of tax as is currently in vogue on property income under the FBR system. Under the specific provision, the rent for use of agricultural land, which is a general practice, especially for large landowners, is an agriculture income.
There is effectively no mechanism to ensure completeness of recovery of taxes from such receipts. Such rent income should be subject to the same rate of tax as is currently in vogue on property income under the FBR system.
With a view to broaden the tax net, the tax authorities should use technology, data analytics including artificial intelligence tools and make better/effective utilization of the NADRA database and other documented sources to ensure that all income earners from services are included in the provincial taxpayers' list.
The sales tax collection from other cities in Punjab and new sectors of services should be shared at least quarterly with the stakeholders like OICCI showing growth faster than in collections from mature markets like Lahore.
The sales tax on services for income tax non-filers should be double the tax on filers of tax returns. Additionally, preferential treatments to active filers may also help like active filers should be given early utility connections.
To widen the scope of tax collections from services, marriage halls, art exhibition halls, and other public places holding functions where economic transactions are done should provide names and addresses of persons involved in these business activities to the provincial tax authorities on a quarterly basis.
The OICCI further suggested that the PRA (Punjab Revenue Authority) sales tax rates on services should be aligned with the Sindh sales tax rate, which is 13 percent and gradually reduced to 10 percent over the next three years to be aligned with the regional countries.
The current rate should be maintained for unregistered entities. The rate gap will encourage registration of the unregistered taxpayers to avail of the benefits of input adjustment and will enhance documentation.
Amendments be made to provincial sales tax act on services to allow the registered persons to claim input tax related to procured goods/services taxable at whatever rate (lower, standard or higher). Amendments should be made to provincial sales tax act on services to allow the registered persons to claim input tax related to procured goods/services taxable at whatever rate (lower, standard or higher).
A separate schedule should be inserted in provincial sales taxes act for zero-rating. All services provided to foreign companies outside Pakistan which result in inflow of foreign exchange and export of all taxable services should be exempted from Punjab Sales Tax on Services.