PESHAWAR, March 15: The cash-strapped NWFP government will lose annually Rs75 million, if agriculture income tax collection is delegated to the federation in line with a proposal floated by the Central Board of Revenue (CBR), officials say.

Financial managers of the provincial government told Dawn that the tax was an important component of direct provincial revenue and its handing over to the Centre would reduce fiscal space for the province that was already heavily-dependent on transfers from the federal government.

The federal government was examining a proposal to empower the CBR to collect the tax on behalf of the four provinces on the basis of income from the sale of agricultural produce by next financial year (2007-08).

According to CBR Chairman Abdullah Yusuf, the agriculture sector, which has a 22 per cent share in GDP, had no contribution in taxes. He told a press conference last month that the CBR was consulting provinces for obtaining their viewpoint on the issue.

Authorities in the NWFP government considered the move to be as a step to limit the financial authority of the federating units although currently the trend of overall collection from this sector was not encouraging.

The provincial Board of Revenue (BoR), which was authorised to collect such taxes, had been unable to achieve targets for the past couple of years.

Statistics showed that the board collected only Rs50 million in 2005-06 against an overall target of Rs70 million.

Similarly, recovery in this sector had remained at Rs47.42 million in 2001-02, Rs44.38 million in 2002-03, Rs57.98 million and Rs46.93 million in 2004-05.

The provincial government had set a target of Rs75 million in the current fiscal year (2006-07) for the tax, which authorities considered to be ‘unachievable’.

The officials associated with the agriculture income tax collection believed that tax collection would further decrease in the coming days.

They said that the NWFP government had imposed agriculture tax only on 30 per cent of its total area, including Peshawar, Mardan, Charsadda and Swabi districts besides the Hazara region. Growing urbanisation, they said, in these areas was one of the main reasons for declining recovery of the griculture tax.

Likewise, the provincial government had exempted farm lands of less than five acres from all taxes that restricted the revenue volume because most people in these areas had small land holdings.

Officials said that the move would also have political implications.

“The provinces are demanding greater provincial autonomy, but instead of delegating more powers, the Centre is curtailing the province’s limited authority. I think none of the federating units would accept it,” another senior official said.