The Federal Board of Revenue (FBR) has proposed the imposition of an indirect tax on initial agricultural production process instead of levying direct tax on farm income.
According to a document available with The Express Tribune, FBR Chairman Salman Siddique has said that the imposition of direct tax (income tax) on the agricultural sector will not yield much revenue, and proposed levy of indirect tax to bag revenue according to the sector’s potential.
He has suggested that the best way for collecting revenue from the farm sector is to tax its initial stages of production. In this regard, he pointed out that the tax can be imposed at the stage of cotton ginning and rice threshing.
In addition to this, FBR may use the Produce Index Unit (PIU) as a base for levying tax on agriculture, which varies from district to district.
In order to implement the farm tax, the government needs to conduct a study as the FBR chairman was of the view that it does not have the required expertise to handle agricultural production and land record data.
Separately, FBR is also considering restructuring the formula for calculating tax to gross domestic product ratio by excluding the agricultural sector from its scope.
Published in The Express Tribune, May 19th, 2011.
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