Tax on middlemen opposed by growers, agents

Final consumers to be burdened as increment likely to be passed on.

HYDERABAD:

The recently-imposed tax on commission netted by middlemen from growers is likely to put the burden on final consumers of food items.

“The government is trying to fool us, claiming the tax will not be applicable on growers,” said Sindh Abadgar Board President Abdul Majeed Nizamani, adding that it was just another indirect tax on agriculture. “A commission agent charges farmers around eight per cent of the amount paid for purchase of farm produce. Now the same grower will have to let the agent deduct 18 per cent from that amount.”

A circular issued by the Federal Board of Revenue (FBR) on Saturday had announced the new 10 per cent advance tax or brokerage fee on middlemen, and withholding tax of 1.5 per cent on sale of cotton seeds, rice and edible oils.

Nizamani expressed disappointment at the decision, saying it had become impossible for a new tax to be levied without growers being affected.

An office-bearer of Sabzimandi Hyderabad’s Commission Agents Union espoused Nizamani’s views on the issue, saying that the commission agents spend over half of the amount charged from growers on expenditures.

“Out of the eight per cent we earn from transactions, around four per cent is spent on transport and other expenditures. Therefore, it is beyond the realms of possibility for us to pay the tax from our pocket,” said the agent, adding that the burden would definitely be passed on to the growers, and ultimately, the final consumer.

Another agent maintained that they were already paying multiple taxes including income tax, market committee tax, and professional tax. “A new tax to the tune of 10 per cent on top of the eight per cent commission earned by the agents is nothing but irrational,” said Hyderabad Chamber of Commerce and Industry former vice president Javed Ahmed. He added that the impact of the levy would definitely be passed on to the final consumer, leading to an inevitable surge in prices.

However, Sindh Chamber of Agriculture has said it will come with a complete response to the new tax after their meeting scheduled for Friday. “Although we reject the withdrawal of subsidies and the imposition of new taxes, we have called a meeting on Friday; we will also consult growers in Punjab to deliberate on the issue,” said chamber president Muhammad Anwar Bachani.

Growers have already expressed dismay over a host of government policies deemed detrimental for their sector. Withdrawal of the government subsidy and successive hikes in petroleum prices have already negatively impacted the growers.

In its monthly meeting, the Sindh Abadgar Board strongly demanded withdrawal of taxes on fertilisers, pesticides, hybrid seeds, and agricultural machinery.

Published in The Express Tribune, April 5^th,  2011.