According to a survey carried out by Business Recorder, there is a growing clamour, both from inside the country as well as from external donor agencies and bilaterals, for the imposition of a tax on the income of farmers with the explicit objective of reforming the current inequitable tax system in the country.
A tax on farm income, there is agreement across the board, would be equitable as it would bring those with income well above that of more than half the existing income taxpayers of the country into the tax net. In addition, it would raise badly needed resources and would also increase the tax to Gross Domestic Product (GDP) ratio as any increase in farm output would automatically increase the tax collected. The premise is simple and followed by countries all over the world: tax on income must be the same for all sectors or in other words, if the government takes income tax from someone making 30,000 rupees per month, then it must also tax someone whose monthly income is far in excess of this amount.
The fact that almost 90 percent of all representatives of the people sitting in the country's national and provincial assemblies are rich landlords and are directly responsible for ensuring that a tax on their income from their profitable landholdings remains negligible is lamentable.
Agriculture's share in the country's GNP is 23 percent and yet taxes collected from this sector remain negligible. It is precisely such statistics that account for US Secretary of State Hillary Clinton's statements that the government of Pakistan must begin to tax its own rich rather than rely on US taxpayers.
The influential farm community, in its own defence, argues that it is subject to rising cost of inputs, electricity as well as water, and pays many indirect taxes hence cannot pay an income tax. True, but then so do all other sectors, including householders, defined as those who do pay income tax. In any case analysts point out the call is for the rich farmer to pay a tax on his/her income, which is essentially revenue minus costs.
The rich farmers have historically also presented the argument that farm income tax is constitutionally a provincial subject. True, but then so is the general sales tax on services, which the provinces have agreed the FBR will collect on their behalf.
Provincial farm tax collections are appallingly low for two reasons: (i) provincial farm tax is imposed on landholding rather than on the income the land generates. The Federal Board of Revenue (FBR) would have to undertake the task if a tax is imposed on the income of the landlord and this can be carried out by assessing the income earned from sale of agri-produce.
It is symptomatic of our MNAs' focus on their self-interest rather than on national interest that there was bipartisan support for not making farm tax a federal subject during the yearlong deliberations on the 18th Constitutional Amendment, with the exception of the MQM; (ii) collections are also poor because in spite of massive leakages from the FBR, it has more capacity to collect revenue than the provincial revenue departments.
In this context, statements by both industrialists, that the federal government mainly relies on them to generate revenue, as well as the growing consensus inside and outside the country that the salaried class, not rich by any standards in terms of purchasing power, bears an inordinate burden in terms of income tax is valid.
The Business Recorder has always backed the imposition of a tax on the income of the rich landlords, as determined by sale of agri-produce. In this context it is relevant to note that Shaukat Tarin, the predecessor of the incumbent Finance Minister, did publicly support a tax on the income of rich farmers, a support he could not implement due to resistance by parliamentarians, while Dr Hafeez Sheikh has openly supported the parliamentarians' view by publicly stating that it is a provincial subject, we suggest that he should seek to persuade the provinces to allow the federal government to collect tax on farm incomes on their behalf against a collection fee. The provinces would be better off if they accede to this request as it would increase their revenue incomes manifold.