KHYBER Pakhtunkhwa has achieved aggregate target for farm income tax and land revenue set at Rs21 million last fiscal year which is, however, much lower than the sector’s potential.

If one goes by the slabs in the Ordinance 2001, the tax collection turns out to be a paltry sum because of so much non-compliance by the landed gentry.

The share of agriculture income tax (AIT) was just 0.11 per cent in the total provincial own receipts (PORs) of Rs18.91 billion and only 1.5 per cent in the direct taxes of Rs1.4 billion. Tax from AIT is targeted at Rs22mn for the current fiscal.

An official said the income from land tax/AIT dropped because the government, after second thoughts, exempted five acres or less land from land tax and the number of tax payers decreased.

But, the AIT should have gone up in the wake of rising farm incomes owing to increased support prices of wheat and sugarcane and rising cereal and fruit/vegetable prices.

Under the 2001 Ordinance, the AIT is levied on income from ‘cultivated land’ —- the net area sown and the harvest during a tax year, regardless of the number of crops raised, including area under fruit-bearing orchards. It is collected from the owner, mortgagee or lessee or tenant.

Land tax is collected at a fixed rate of Rs72 per acre while exempting 12/5 acres under crops and Rs300/acre for orchards.

Initially there was also no exemption for LT but later five acres or less of agriculture land under crops or orchards were exempted. Of late, this limit has been increased to 12.5 acres.

There are around 28,000 landlords holding over five acres, but only 100 are registered tax payers.

The taxes are collected by the revenue and estate department through patwaris. Small farmers say they have no political clout and have to oblige patwaris while remaining major contributors to the AIT.

“In the absence of any reliable computerised system for the assessment and determination of expected agriculture income each year and the lack of a sound computerised database of all landowners in the province, the AIT collection is left to the discretion of the dreaded patwari.

He can claim any amount from a small landowner/farmer to extract bribe from him. “The Patwari can damage property record and lodge false complaint against you in revenue court,” said a farmer.

According to growers, there is rampant evasion of taxes and corruption in the system.

“Patwaris lack the power to make the powerful landlords pay the taxes. Once an officer asked a patwari in my presence to visit a landlord and collect the taxes from him. The patwari said he would not go because he may not be able to return as the landlord had threatened him with detention if he visited him for tax collection.

The fact is big landlords hardly contribute any taxes while small farmers are subjected to unjust taxation,” he said.

“The problem will be there unless land record is computerised with an unquestionable database of landholders, their normal incomes, and a list of persons liable to pay taxes while the discretionary role of the patwari is minimised” he argued.

But a patrwari said, “many farmers are defaulters and our repeated visits and requests to them to clear their dues fall on deaf ears,” he said.

According to a farmer, there is no formula to assess the difference in quality of land, seeds, water and the weather effects.

“The provincial board of revenue needs to provide basic training to revenue officials on computing farm incomes on the basis of returns filed by growers,” he said.

Land revenue receipt, recorded at Rs604 million in 2007, rose to Rs915 million in 2011. It has been targeted at Rs920 million for FY2012-13.