While at least three major political parties are in favour of taxing the agricultural sector, none of them have proposed the idea in their budgetary recommendations for the new fiscal.
Two government allies, namely Muttahida Qaumi Movement (MQM) and Awami National Party (ANP), along with the main opposition party Pakistan Muslim League-Nawaz (PML-N), have said they will back the government if it proposes any tax on the income generated from the sector, which constitutes around a quarter of national income. None of the parties, however, appear to be actively pursuing the move.
The agricultural sector makes up 22% of Pakistan’s Gross Domestic Product (GDP) and employs roughly half of the country’s total workforce. The sector’s contribution to the national revenue is negligible, however, at 1%. Both livestock and forestry, which cover 53% of current agricultural income, are exempt from taxes as well.
The ruling Pakistan Peoples Party (PPP) is opposed to taxing agricultural income, fearing the move will alienate its vote bank. PPP senior lawmaker Saeed Ghani categorically opposed a proposal to tax the agricultural sector in 2012-13 fiscal, placing the party squarely against PML-N which tabled the proposal in the Senate this week.
“We do not favour levying ‘agri tax’,” Ghani, a member of Senate Standing Committee on Finance, said in his speech delivered in the Upper House of parliament.
“Yes, my party backed levying tax on agricultural income across the board… but this time it did not submit its proposals to the Centre since the issue has become a provincial matter now,” said Nasreen Jalil, Chairperson of the Senate Standing Committee on Finance.
According to ANP lawmaker Bushra Gohar, the party is backing a proposal to tax agriculture.
“The government should collect taxes on agricultural income … Farming must contribute to the national GDP.”
“Feudal lords who control over 22% of the national output must be bound to pay taxes,” said PML-N Senator Mushahidullah Khan.
“We back all political parties when they stand united on taxing agricultural output.”
He added that even though the issue was under a provincial mandate since the passage of the 18th Amendment, laws should be reviewed to bring the income within the tax net.
Lawmakers across party lines also urged the government to amend the Income Tax Ordinance 2001 according to which a farmer possessing less than either 50 acres of irrigated land or 100 acres of ‘barani’ land is not required to pay maximum taxes on agricultural income.
Estimating that the sector generated a revenue potential of around Rs300-400 billion annually, Leader of the Opposition in the Senate Ishaq Dar said a meagre Rs1.4 billion had been collected through agricultural taxes in Punjab and Sindh, while Rs400 million were collected from Balochistan and Khyber-Pakhtunkhwa.
Published in The Express Tribune, June 9th, 2012.
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