FBR creates Rs2bln demand for misuse of income tax exemption

KARACHI: The Federal Board of Revenue (FBR) has swooped in a rare move to recover an estimated two billion rupees in taxes from agriculturists who misused concessions awarded to the agriculture sector by evading tax payments on non-farm income, well-placed sources said on Friday.

The sources said the FBR has so far issued notices to 360 owners of agricultural lands in Sindh alone for pretending income from non-agriculture assets as earnings from the agriculture sector.

The sources in Regional Tax Office (RTO)-II Karachi said the proceeding has been started to recover the evaded tax money. An official at the RTO –II Karachi confirmed that around two billion rupees of tax demand has been created against the defaulters. The official said the office has initially recovered around Rs20 million.

The federal government has no authority to charge income tax on agriculture sector under the constitution. Provincial governments are, however, empowered to collect agriculture income levy.

The Federal Tax Ombudsman (FTO) took a suo moto notice against such type of tax evasion during the current fiscal year. A large number of taxpayers have been showing a substantial portion of their income from non-agriculture assets as agriculture income, the FTO said.

“As tax on agriculture income was a provincial subject, so they were paying income tax to FBR on the income declared other than agriculture sources,” the FTO said in a latest report. “At the same time, they were not paying agriculture tax to the provinces.”

The FBR started sending tax notices to such defaulters after the Federal Tax Ombudsman brought this non-compliance into the FBR’s notice. The FBR sources said the RTO – II Karachi started collecting data of individuals earning agriculture income after the FTO pointed at the issue.

“The tax office collected data through third party along with various transactions on which withholding tax was paid,” another official at RTO-II Karachi said.

The tax official said the regional office has sent a large number of notices to individuals who generate agriculture income. The tax department excluded numerous cases after people in question presented payment evidences of agriculture income tax to the province, the official added. However, around 360 agriculturists who failed to furnish evidences and who were showing income from other sources as agriculture sector’s earnings were issued recovery notices.

The official said the FBR would take harsh measures against the agriculturists and might take actions, including seizure of property, freezing of bank account and arrests of the defaulters in case of their non-compliance.