Reforming agriculture income tax regime can generate up to Rs 115bn
November 15, 2012
ISLAMABAD: The country could generate Rs 80 billion to Rs 115 billion by reforming agriculture income tax regime.
Economists here on Wednesday presented these estimates during the second day of the 28th Annual General Meeting and Conference organised by Pakistan Institute of Development Economics (PIDE).
Senior economist Anjum Nasim while delivering his research paper on ‘Agriculture Income Taxation: Estimation of Revenue Potential in Punjab’ stated that there could be different scenarios for imposing agriculture income tax. One estimate suggested that by using the income tax rates applicable under Finance Bill 2012 the potential tax revenues for Punjab from crop farming on the basis of production achieved in 2009-10 would be standing at Rs 16 billion to Rs to 20 billion, assuming no difference in average yield per acres among small and large farmers, he added.
“If the yield of large farmers (with farm size of 25 acres and above) is 50 percent more than that of small farmers, then the tax potential is estimated at Rs 24 billion to Rs 29 billion,” he maintained. Had the tax been in place in the tax year 2010, the tax revenues would have been between Rs 55-75 billion if small and large farmers were equally productive and the revenue would be standing between Rs 63-79 billion if large farmers were 50 percent more productive than small farmers.
Applying this method of estimation for Punjab, Nasim said that the potential tax revenues from agriculture crop income for the whole country would be estimated in the range of Rs 80 billion to Rs 115 billion in 2009-10 compared with Rs 529 billion collected as federal direct taxes (mostly income taxes) from non agriculture sector in 2009-10.
Explaining the reasons for low revenue collection from existing AIT in the provinces, he was of the view that the current scheme of agriculture income tax is effectively a tax on land of over 12.5 acres and not on incomes and the provincial governments have not revised the tax rates to reflect the change in the income potential from land. Nasim proposed to redesign the land tax with the purpose to distribute the burden of tax more heavily on large landowners.
Courtesy: Daily Times