ISLAMABAD, May 21: The economic ministries appear to have reached near consensus to impose tax on agriculture income in the next budget to widen the existing narrow tax base. But the move is likely to face stiff resistance in the parliament, which is dominated by land owners and their supporters.
Informed sources told Dawn that a number of officials of the economic ministries have agreed with the industry people that the agriculture sector, whose share in the total GDP was 25 per cent, was paying less that 0.5 per cent tax and should not be allowed to continue evading taxes.
The government has been advised to stop accepting the agriculture tax as being a provincial subject by immediately introducing an amendment in the constitution. The subject of agriculture, the government was asked, to take away from the provinces and place it under the federal government.
The sources said that President General Pervez Musharraf and Prime Minister Shaukat Aziz have also been informed about the increasing demand of the industry people to enhance the tax-to-GDP ratio by taxing the agriculture income.
“The government has injected additional Rs40 billion in the agriculture sector during the last two years that largely helped improve the performance of this sector, which certainly warrants levy of tax on agriculture income,” a source said.
He said that the Central Board of Revenues (CBR) has received a set of proposals from the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) asking the government to also tax the agriculture income along with retail and services sectors as they were not adequately paying their taxes.
“People in my office including those in grade 16 are paying their taxes but our landed gentry, which earns billions of rupees annually does not want to be in the tax net because of their huge influence in the national and provincial assemblies,” another source said. The president and the prime minister, he said, were paying the “cost of democracy” by still listening to the dictates of the agriculture lobby about the tax on agriculture income.
President of the FPCCI Chaudhry Muhammad Saeed when contacted confirmed that the issue has formally been discussed with top government officials and that the president and the prime minister were concerned that why the agriculture sector should continue to be out of the tax net.
“We have held negotiations with the chairman, CBR, Abdullah Yousef and convinced him that tax on agriculture income should be levied in the next budget,” he said adding that higher authorities wanted to have an increased tax base so that more fiscal space was available in the next budget to undertake additional development projects.
Pakistan’s manufacturing sector, he said, was paying a total of 50 per cent taxes and their share in the GDP was 18 per cent. “We have told the government that we are forcing the business community to pay more taxes,” he said regretting that in the population of 150 million, only 1.2 million were paying taxes.
