AGRICULTURAL INCOME TAX in PAKISTAN — A BRIEF SURVEY
Rasheed Hassan Khan
In 1860 the British Imperialists levied income tax in India. Agricultural Income was also taxable.
In 1882 Agricultural Income was exempted from taxation.
In 1922 Income Tax Act was promulgated and Agricultural Income was exempted from taxation.
In 1925 Indian Taxation Enquiry Committee was constituted, which recommended taxation of all incomes including the agricultural incomes.
In 1935, the taxation system was divided been the central and provincial governments. Agricultural tax was removed from the purview of the central government.
In 1944, a law for the imposition of Agricultural Income Tax was promulgated in the Province of Bengal.
In 1948 in Pakistan, the Provinces of Punjab-Bhawalpur and N.W.F.P. promulgated similar laws.
In 1956, with the promulgation of the constitution, the agricultural tax was removed from the purview of the central government.
IN 1959, Taxation Enquiry Committee recommended taxation of agricultural income but the Food and Agricultural Committee recommended exemption of Agriculture from taxation.
In 1963, Fact Finding Committee on Agriculture opposed imposition of tax on agriculture.
In 1964, Taxation and Tariff Commission recommended the imposition of tax on agriculture and handing over the subject to the Federal Government, but the Government of West Pakistan vetoed the proposal.
In 1970, the Enquiry Committee on Agriculture recommended the imposition of income tax on agricultural income on a very limited scale, but it was not accepted.
In the 1973 Constitution, agricultural income was again exempted from taxation.
In 1977, the Federal Government repealed the I.T. Act of 1922.
In 1977 the Assembly passed the Financial Ordinance, which exempted 25 Acres irrigated and 50 Acres non irrigated land from taxation. Due to the imposition of Martial Law, it could not be Implemented.
In 1979, Agricultural Income was exempted from taxation by the I.T. Ordinance.
In 1986, the National Taxation Reform Commission examined the imposition of Agricultural Income tax but there was no outcome.
In 1992 there was a serious deficit in tax revenue. Serious consideration started to be given to the imposition of agricultural income tax.
In 1993 The Care-taker Prime Minister Moin Qureshi rescinded the Section 5-a of the Wealth Tax Act (1963) so that agricultural income may be taxed on a limited scale.
From the above it is clear that during the last Century and Half the question of Agricultural income tax has been a subject of debate, but without any result. The taxation policy throughout the world is on income- period. It was only in India and Pakistan that the distinction between agricultural and income from other sources was made. Even in India the distinction was later done away with. The reason is not difficult to fathom, the exemption from taxation was the privilege granted to the scions of those elements who helped the British Imperialists in occupying and ruling the sub- continent. Therefore while the middle class and the salaried people are crushed under the dual burden of taxation and rising cost of living, the feudal and land owning classes are free to earn millions from their fruit orchards and fields.
The exemption of agriculture from income tax has also given rise to fraudulent practices where income from shady sources is filed under the heading of agricultural income, thereby depriving the exchequer of millions in taxes. The industrialists, the traders and the civil and military bureaucrats, all are utilizing this loophole to defraud the treasury. The gravity of the situation is apparent to any literate citizen of Pakistan, but the Government of the day is totally blind to the situation. Their policy is, pocket their profits and then go with the begging bowl to the West to finance the economy. Because the repayment of these loans( $ 52 Billion by 2009) will be made by the people and their future generations and not the ruling classes. The late Dr. Mahbub ul Haq is on record as saying that the Deficit in the 1985 budget of 65 billion rupees could have been met had the government chosen to impose income tax on agriculture then.
The political leadership of all major political parties today are shouting themselves hoarse about their commitment to democracy. Can we venture to question them as to what their democracy means, if everyone is not equal before the law? It was only in moribund states and societies, such as Russia and France that the Feudal class and the Churches were exempt from taxation. Even in England, across the board taxation was imposed very early. Today the acid test of who really represents the people, lies in identifying as to who is ready to fight for the economic emancipation of the people, let all the political parties bear this in mind when they are judged by History.