IT is quite surprising if not disconcerting to see the PPP government in Sindh dragging its feet on the changes to the provincial agriculture income tax law to meet one of the core conditions of the ongoing IMF programme: abolition of all AIT-related exemptions for fully harmonising provincial [AIT] regimes through legislative changes with the federal personal and corporate income tax regimes. Is the fear of big landlords who form the core of the party in the province keeping its leadership from amending the law? Or is it part of some strategy to bring pressure on the centre to force it to accept other provincial demands on the controversial canal projects Islamabad has approved despite the PPP’s opposition? The reason remains unclear.

At a meeting of the National Tax Council held recently to review implementation of the tax-related conditions agreed with the IMF, a representative of Sindh disclosed that the draft bill was ready. But he refused to give a time frame for its passage from the assembly. “The matter should be taken [up] at the level of the political leadership,” he reportedly told the NTC. Under the agreement with the IMF, the provinces had agreed to amend their agriculture income tax regime before the end of October to ensure the application of new rates from Jan 1, 2025. That deadline has long passed, with only Punjab having amended its AIT for the purpose. Even the Punjab legislation is ambiguous since it gives the power to determine and notify the new tax rates to the provincial cabinet rather than making the rates part of the legislation, exposing the changes to potential legal challenges. Balochistan and KP have also finalised the draft bills to change their AIT systems but these are yet to be tabled in their respective assemblies for approval. It is a well-known fact that the top PPP leadership is not in favour of increasing the AIT rates and President Zardari had equated this particular IMF condition with a bitter pill that they would have to swallow. The inherent abhorrence of the landed aristocracy for any kind of taxes aside, it is no longer tenable for any government to not tax all incomes equally regardless of their sources. Hence, Sindh must fulfill its commitment and get the changes in its AIT law passed as soon as possible.

Published in Dawn, December 6th, 2024