If Rs50,000 is collected on acreage basis: Agri income tax can fetch Rs69b revenue

ISLAMABAD: The FBR’s Tax Gap Analysis shows that Agriculture Income Tax could fetch Rs69 billion revenues on per annum basis if Rs50,000 was collected on per acre basis over certain limit of landholdings.

At the moment, with contributions of sitting parliamentarians having feudal backgrounds federal and provincial ministers such as Syeds, Tarins, Makhdom, Chattas, Watoos, Qureshis, Jatts and many others, the total contribution of Agriculture Income Tax stood at meager amount was less than Rs1.5 billion from all provinces on annual basis.

This was the figure of potential revenue from agriculture income tax shared by FBR high-ups in online webinar organized by Pakistan Institute of Development Economics (PIDE) here on Wednesday. Renowned economists Dr Nadeem Ul Haq, former Governor SBP Shahid Hafiz Kardar and reputed lawyer and tax expert Dr Ikram Ul Haq also spoke on the occasion.

The FBR’s Tax officer Reema Masood said on the occasion that all incomes should be taxed irrespective of any sector. The agriculture income cannot be collected by FBR under existing constitutional arrangement because its domain of the provinces, however, the FBR has done its tax gap analysis and estimated that its revenue losses stood at RS69 billion on per annum basis.

The FBR officer said that the tax machinery adopted revenue foregone approach and estimated that tax exemptions was causing loss of Rs1.2 trillion on per annum basis, equivalent to 3 percent of GDP.

She conceded that the cost of tax exemptions surged over the years as it stood at Rs412 billion in fiscal year 2014-15 that now had ballooned to Rs1.149 trillion in fiscal year 2019-20. In last two years, the cost of tax exemptions increased phenomenally as it stood at Rs540 billion in fiscal year 2017-18 but now it surged to Rs972 billion in 2018-19 and now further increased to Rs1.149 trillion. This trends show that the cost of tax exemptions almost doubled under PTI led regime in last two years.

She said that the FBR abolished nine withholding taxes in the last budget and more withholding taxes would be done away in gradual manner over next few years. “The FBR plans to abolish 30 to 40 Withholding Taxes over next couple of years” she added. However, she defended the FBR position and argued that without broadening of tax base the tax rates and number of taxes could not be reduced.

Under the IMF programme, she said that the FBR used to busy in firefighting all the time because there was always pressures to raise tax to GDP ratio through materializing unrealistic targets.

Former governor SBP Shahid Hafiz Kardar said that the cost of tax expenditures/exemptions was on lower side and argued that cost of Free Trade Agreements (FTAs) with different countries were estimated at Rs45 billion while FTA with China was estimated at revenue loss of Rs34 billion. This revenue losses, he said, was under stated because massive under invoicing was being done and added that the cost of CPEC exemptions was not fully counted by the FBR. He also identified that the cost of tax exemptions for IPPs stood at Rs52 billion in 2013-14 but now the FBR showed its cost at Rs27 billion in 2019-20 so how the cost of exemptions got reduced in last six years period. He also raised the issue of capital gains tax on property and informed that Bombay was collecting $750 million tax from property while Pakistan’s Punjab province was collecting just $75 million. The collection of Bombay was five times higher than whole Pakistan, he added.