Centre to provinces: Project aid depends on increase in agriculture tax collection
Finance minister says hiding behind the constitution will not yield results.
ISLAMABAD:
The federal government has informed the provinces that future flow of foreign aid for provincial development projects would largely depend on their ability to improve agriculture tax collection, as the four provinces are not in a mood to introduce major reforms in their upcoming budgets.
In a recently held meeting between the Centre and provinces to resolve the agriculture tax issue, Finance Minister Abdul Hafeez Shaikh told the provinces that this time hiding behind the constitution would not yield results, as international lenders have started questioning provincial revenue collection, a finance ministry official said.
He said the finance minister told the provincial representatives that their bid to win foreign loans for development projects would largely depend on their ability to reform tax regimes.
“When provinces are not doing enough to generate taxes, they should also not expect the federal government to remain aloof anymore,” the official quoted the finance minister as saying. Under the constitution, taxing agriculture income is a provincial subject.
The Punjab government is going to announce its budget today (Friday) and according to the finance ministry official no major decision on improving farm tax collection is expected. “So far, provinces are reluctant to do something,” he added.
The finance minister is said to have asked Punjab to take the lead and repeat the intention of doing something on the agriculture tax, said the official. The federal government proposed to give up the regime of fixing agriculture tax on the basis of structural rates and instead align tax rates in all provinces.
The official said Punjab representative Sardar Zulfiqar Khosa, Senior Adviser to Chief Minister, took the plea that in Punjab 85 to 90 per cent were small landholders, prompting the finance minister to comment that “big landlords should not use the name of small farmers for vested interests.” Punjab’s tax collection from agriculture income is around Rs500 million.
The Balochistan government informed the federal government that it would not be in a position to commit on agriculture tax reforms at this juncture. The only positive sign was shown by the Khyber-Pakhtunkhwa government which said it would be ready to introduce reforms, provided other provinces do the same.
The Sindh finance minister vowed to collect more taxes but shied away from giving any commitment on rationalisation of rates, the official added.
Published in The Express Tribune, June 10th, 2011.
The federal government has informed the provinces that future flow of foreign aid for provincial development projects would largely depend on their ability to improve agriculture tax collection, as the four provinces are not in a mood to introduce major reforms in their upcoming budgets.
In a recently held meeting between the Centre and provinces to resolve the agriculture tax issue, Finance Minister Abdul Hafeez Shaikh told the provinces that this time hiding behind the constitution would not yield results, as international lenders have started questioning provincial revenue collection, a finance ministry official said.
He said the finance minister told the provincial representatives that their bid to win foreign loans for development projects would largely depend on their ability to reform tax regimes.
“When provinces are not doing enough to generate taxes, they should also not expect the federal government to remain aloof anymore,” the official quoted the finance minister as saying. Under the constitution, taxing agriculture income is a provincial subject.
The Punjab government is going to announce its budget today (Friday) and according to the finance ministry official no major decision on improving farm tax collection is expected. “So far, provinces are reluctant to do something,” he added.
The finance minister is said to have asked Punjab to take the lead and repeat the intention of doing something on the agriculture tax, said the official. The federal government proposed to give up the regime of fixing agriculture tax on the basis of structural rates and instead align tax rates in all provinces.
The official said Punjab representative Sardar Zulfiqar Khosa, Senior Adviser to Chief Minister, took the plea that in Punjab 85 to 90 per cent were small landholders, prompting the finance minister to comment that “big landlords should not use the name of small farmers for vested interests.” Punjab’s tax collection from agriculture income is around Rs500 million.
The Balochistan government informed the federal government that it would not be in a position to commit on agriculture tax reforms at this juncture. The only positive sign was shown by the Khyber-Pakhtunkhwa government which said it would be ready to introduce reforms, provided other provinces do the same.
The Sindh finance minister vowed to collect more taxes but shied away from giving any commitment on rationalisation of rates, the official added.
Published in The Express Tribune, June 10th, 2011.