At odds once again: Centre, provinces at odds over uniform farm tax rate

Provinces deny agriculture tax collection rights to FBR.

ISLAMABAD:

The federal government’s attempt to introduce a uniform agriculture tax in all provinces from July could not sail through, as all the provinces including Sindh opposed the move on Tuesday, burying the controversial issue, at least for the time being.

Inside sources told The Express Tribune that a meeting between the federal and provincial governments failed to develop consensus on the issue of aligning the agriculture and land tax rates. They added the proposal to tax agriculture income above the ceiling of Rs350,000 also failed to win the provinces’ nod. The provinces also opposed the proposal of giving the right of collection of agriculture tax to the Federal Board of Revenue.

After the Muttahida Qaumi Movement’s constant demand to tax the agriculture income, the Council of Common Interests – the highest decision-making body between the Centre and provinces, constituted a committee to resolve the issue before the presentation of provincial budgets. Federal Finance Minister Dr Abdul Hafeez Shaikh is the head of the committee with provincial finance ministers as members. Currently, agriculture tax is levied in all provinces but the collection is far beyond the potential with different rates.

A provincial finance secretary said on condition of anonymity the federal government pushed the provinces to address legal lacunas in their respective agriculture tax laws and set uniform rates. He said the finance minister also urged provincial representatives to improve tax assessments besides collecting actual taxes.

Secretary-level talks would now take place after the presentation of provincial budgets, said the official. Hafeez Shaikh refused to share details, saying only that “it was basically an information-sharing meeting” – a statement that ridicules the mandate given by the CCI. The CCI has called for resolving the issue with consensus.

Sindh Finance Minister Murad Ali Shah was the first to oppose a uniform tax rate and also the first to leave the meeting. The federal finance minister had recently said Sindh’s income from agriculture tax had drastically reduced to just Rs150 million from Rs500 million in 2000.

Sources said Balochistan also opposed the attempt to introduce a uniform agriculture tax across the board. The provincial finance secretary is said to have informed the committee that due to harsh ground realities, a decade of drought and now worst-ever floods, the farmers need subsidies instead of new taxes. The Balochistan government is collecting Rs65 million in agriculture tax – Rs60 million land tax and Rs5 million income tax.

“The federal government has tabled suggestions on agriculture tax that will be presented to the chief minister,” said Sardar Zulfiqar Khosa, Senior Adviser to the Punjab CM.

He said the provinces have sought detail from the Federal Board of Revenue about people who pay tax on agriculture income. He confirmed that the federal government has asked the provinces that “there should not be any difference in the rate of agriculture tax.” Punjab underlined the need for building on the existing laws instead of doing something novel, sources said.

“The agriculture tax is not just a matter of political point-scoring by one province but it is a matter that requires sufficient time before reaching a conclusion,” said Khyber-Pakhtunkhwa Finance Minister Humayun Khan.

He admitted that the provincial agriculture tax collection was not up to the mark and last year the province bagged Rs1.9 million. To a question, he said it was premature to give the agriculture tax collection right to the FBR as even the stage of revising the tax rate has not yet reached.

Published in The Express Tribune, June 8^th, 2011.