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Punjab misses agriculture income tax target

Munawar Hasan

LAHORE: The Punjab government’s initiative to enhance the recovery of agricultural income tax proved a nonstarter as it managed to collect only Rs830 million on this account against the target of Rs2.01 billion during the fiscal 2013-14, The News learnt on Saturday.

Actually, the provincial government had shifted its focus to income-based tax collection from the land-based valuation system for agriculture income tax. That may be a reason that it fell short of meeting the fiscal year’s target by whopping Rs1.18 billion.

Compared with the preceding fiscal year, the collected tax was Rs110 million higher in FY14. However, it was on lower side as compared to that of FY11 and FY12.

For the next fiscal year (FY15), the government set the same target of Rs2.01 billion for the agriculture income tax.

The agriculture income tax is an important direct tax for the Punjab, enforced under the AIT ACT 1997, which determined a fixed amount per acre of land.

As per the major amendments introduced to this Act in 2001, holders of 25 acres of irrigated land (equivalent to 50 acres of un-irrigated land) were required to submit their AIT return.

Despite an announcement last year, the income-mode of the tax was, however, not practically implemented due to capacity related issues of the collectors in the field.

The tax collection, however, continued in the fixed mode and owing to the sub-division of land over-time into smaller holdings, and exemption to owners of up to 12.5 acres, the collection from this tax has been declining in recent times, according to the new budget document.

Commenting on what he called bad governance on part of provincial government in tax recovery, Sarfraz Khan, former member Federal Board of Revenue (FBR) and central leader of Kissan Board Pakistan, said the department concerned has badly failed in engaging farming community on this vital issue. The farmers were not taken into confidence at the time of the formulation of the new mechanism of agricultural income tax collection, he lamented.

Khan said that provincial machinery was also not capable to audit and assess taxable areas of the agriculture sector. The biggest issue is capacity as well as will of the people concerned, he observed.

The member FBR is also wary of the approach of the government for agriculture sector, saying farmers, especially small and medium land holders, are facing huge problem due to high cost of production. He said that farmers in Punjab were burdened under a wide range of indirect taxes, which needs to be reviewed first.

Last year, the provincial government announced that it was fully aware of the revenue potential of AIT. The issue thus had been thoroughly debated and later, the important decisions had been taken to increase the tax recovery.

It may be noted that Shahbaz Sharif-led government reduced the budget estimate of the tax receipt for AIT for 2011-12 to Rs927 million from the level of 2010-11, which stood at Rs1.2 billion, showing a significant reduction.

Owing to the low collection of agricultural income tax, the share of AIT in direct taxes came down to just 2.36 percent in the budget estimate of FY13. It was 4.04 percent in FY12 and 6.75 percent in FY11.

The News: Sunday, June 15, 2014 


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