FBR mulls mandatory tax return filing for agriculturists

KARACHI: The Federal Board of Revenue (FBR) may recommend mandatory income tax return and wealth statement filing by agriculturists in order to prevent massive revenue losses in the agriculture sector, official sources said on Wednesday.

An official at Large Taxpayers Unit (LTU) Karachi said the unit had proposed for budget 2017/2018 to make it mandatory for a person holding above five acres of agriculture land to file annual income tax returns along with the statement of wealth.

The sources said massive concealment had been detected by FBR through scrutiny of transactions obtained from third party. At least 35 cases had been detected by the LTU Karachi of influential persons, who had concealed billions of rupees under the garb of agriculture income, the official said, and added the persons had not declared income, and paid tax to the provincial authorities.

The income tax on agriculture income is a provincial subject and the federal government has no power to ask about such sources of income. However, it is identified that a large number of people club their other source of incomes into agri-income in order to avail reduced rate of tax or exemption.

To an estimate the agriculture sector contributes 24 percent to the GDP, but its contribution in the tax to GDP was nominal at 0.028 percent in the fiscal year 2015/2016. The State Bank of Pakistan (SBP) in its annual review of Pakistan’s economy in 2015/2016 said agriculture tax was collected either in the form of a tax on agriculture income or on land revenue, whichever is higher.

“Therefore, agriculture income tax and land revenue tax must be combined to have a fair picture of tax from agriculture,” the SBP said, and added that Punjab receives the biggest contribution from agriculture sector, followed by Khyber Pakhtunkhwa.

Similarly, it contributed around six percent of provincial collection in Balochistan, while Sindh received only one percent of its collection from this source. “Lower collection from this sector basically represents difficulties in assessing agriculture income, with high chances of corruption and also capacity issues with provincial revenue authorities,” the central bank said.

The trade and industry repeatedly criticised the lower tax contribution by the agri sector. “The biggest exempted sector is agriculture, which does not make any contribution to the national exchequer, despite the fact that over 65 percent of Pakistan’s population is directly or indirectly linked with the agricultural sector,” Overseas Chamber of Commerce and Industry (OICCI) said in its recommendations for budget 2017/2018.

The original rationale of keeping agriculture out of tax net was to facilitate the small agriculturists. “However, due to non-implementation of land reforms, the benefit of the tax exemption is being availed by big landowners earning huge incomes,” the OICCI said, and added that unscrupulous elements also transfer their income and wealth to businesses fronting as agriculture sector. The OICCI also recommended that exemption given to agriculture income should be withdrawn and agriculturists should file income tax returns and wealth statements.