Sunday, October 3, 2010

Flood Tax vs income tax on agriculture

Flood Tax is being contemplated by the government.Normally nation would have gladly accepted the additional load.However,there are several reasons that voices have been raised from popular circles against it.

Firstly,if it is levied on imports,it may be akin to be a tax on poor and the rich alike and may contribute to inflation.Secondly,if it is on income tax , it would mean milking only those,especially ,the salaried class which is paying its taxes without default. Thirdly,it has been argued and demanded that tax net should be expanded and exempted sectors brought into the tax net.Income tax on agricultural incomes and capital gains on stock shares are the two major exemptions.Debate has even extended among donors and public abroad,who think that Pakistan should start bearing its own load and shun the policy of foreign dependence on all kind of aid,flood and otherwise.The taxpayers in the west complain that if Pakistan's rich are not paying their dues ,why should their tax money should be helping Pakistan.

Just today Prime-minister Gilani has announced that some difficult decisions may have to be taken and that he was ready for that.Let the agricultural income tax be one of those decisions.Any body who earns taxable income ,should pay income tax as others do.There used to be an argument against this, citing low and depressed crop prices paid to the farmer.No more is that case valid today.International prices are being paid despite poorly paid agricultural workers and sharecroppers.

And it sends a wrong signal and a depressing one spreading despondency and estrangement.Bulk of Pakistan's ruling elite comes from the agricultural land lords.It is extremely disappointing that they exempt themselves and shirk in sharing the load.Initially,lower landholdings could be left exempted and taxation may start from 50 acres and onwards.Agriculture accounts for 25% of Pakistan,s economy , and should be able to add significantly to the government revenues.

Although I am personally not a taxation enthusiast and I have made my views for lower taxation in Pakistan elsewhere,arguing that economic growth could also be laid by private consumption. it is also a sad fact that in Pakistan tax collection is at a dangerously low level of under 10%.Exemptions ,especially in agricultural sectors not only reduce revenue but are a major source of tax dodging and concealment of income. all kind of incomes are grouped and hidden under exempt agricultural income.If you are a landlord , no question asked.This must go.

Flood tax may only be tolerable by the public in general and taxpayers in particular,,if income tax on agriculture is imposed simultaneously.Finally rulers should declass themselves.Their job is to act in the common national interest .It is another story that democratic governments are so much pressurized by the vested interest from the beginning demoralizing them so much , that any intention or incentive to bring in critical reforms is severely discouraged.despite such difficulties,government of the day must act in national interest and show courage and determination.

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