The member FBR informed provinces that there were legal restrictions in Income Tax Ordinance 2001 due to which it was not possible to share the information of income tax payers. He, however, assured that FBR was ready to extend full cooperation and facilitate Sindh government for further deliberations in the matter and to find out solution of the issue. He, however, advised that Sindh government should strengthen its own revenue collection system; otherwise, sharing of data would be of no use for them.
The meeting was informed that Council of Common Interests (CCI) constituted a committee comprising federal finance minister and ministers of finance and agriculture of the provinces for proposing a uniform taxation policy on agricultural income. The mandate of the committee was to deliberate upon measures of rationalization of agriculture income tax in provinces. The meeting of the committee was held under the chairmanship of the federal finance minister and a subcommittee consisting of federal and provincial finance secretaries and a representative from the FBR was constituted to look into the technical and legal aspects of the matter and submit a report to this committee for firming up its recommendations for the CCI.
This issue was discussed once during a past provincial finance secretaries' meeting and pursuant to the decision taken in the meeting, the provinces (Punjab, Sindh & KPK) sent non-papers to Finance Division. However, no such information has so far been provided by Balochistan. Although this issue has been included in the agenda of provincial finance secretaries' meeting several times yet it could not be discussed. The above referred CCI decision remains unimplemented since long and hence, there is a need to discuss this issue, specifically in the light of non-papers furnished by the provinces and firm up the recommendations for the ministerial committee.
The finance secretary Khyber Pakhtunkhwa informed that Khyber Pakhtunkhwa government does not consider Agriculture Income Tax (AIT) as progressive tax as 94% of the landholdings in Khyber Pakhtunkhwa are less than one acre. He maintained that the livestock comprises two third of the agriculture sector; therefore, there is a need to bifurcate these two sectors in order to ascertain the tax potential in agriculture sector. Additional secretary Balochistan informed that government of Balochistan also does not consider AIT as progressive tax.
Advisor (TP), Sindh Revenue Board stated that he would second the proposals of Punjab that; (i) AIT may be levied and collected from those who have voluntarily declared agriculture income in their income tax returns to FBR which stands already incorporated in AIT Act, during Finance Act 2013, (ii) AIT may be implemented in income mode instead of current fixed mode and it may be deducted exercising withholding mode from marketable surplus through various withholding agents- adjustments to be allowed on filing returns. He, however, requested that data of income tax payers may be shared with the provinces which would be a useful mechanism to locate the AIT evaders.
The additional secretary Finance Punjab reiterated the provinces' earlier proposals that it should be at par with the income tax and it should be levied on income rather than landholdings. He informed that in Punjab 80% of the landholdings get exemptions from AIT because the landowning communities get their holdings bifurcated in order to avoid AIT. He admitted that the existing AIT law needs drastic changes by plugging the loop holes and making it a progressive tax.