Punjab became the first province to pass a law bringing its agricultural income tax law more into line with the demands of the IMF. This conformity with IMF demands was indeed mentioned by the Opposition in the debate preceding the passage, However, farms can congratulate themselves on having had a good run. They were protected from the federal income tax by the Constitution itself, which placed income from agriculture outside federal purview. It is thus purely a provincial subject, and it is through the provinces that the IMF wants it taxed on the same basis as all other income. Agricultural income has become a tool of evasion for those who obtain their income from other sources, such as industry. They show their profitable industry as making a loss, and declare the profits as agricultural income. Then there re large landowners, who do not pay any tax on substantial incomes, which leaves them sufficient surpluses to contest elections (thus saving political parties from having to put up the sums needed to finance campaigns). Thus national and provincial legislatures have seen strong agricultural and industrial lobbies, which have prevented a proper agricultural income tax being imposed.
It is not as if agriculture was untaxed. Going back to the Mughals, ownership (rather than income) was taxed, in the form of land revenue. Once the primary source of income for the government, when it was finally abolished a few decades ago, it had been dwarfed by other taxes. Agricultural income tax was levied for the first time around then, using the same methods. Like land revenue, it was a tax on ownership rather than income. Under the bill, livestock is to be included. The government will have to consider whether the Revenue Department has the capacity to handle the taxation of income, which will ultimately involve filing of not just returns but also expenditures, after which taxable income will be determined. Another danger will be corruption. There is no evidence that farmers are more moral than traders.
It should be remembered that it is not a question of revenues, but of fairness. There seems no reason for agricultural income to be exempt, except that farmers fill the halls of the legislatures. IMF pressure might not be a good reason for making the agriculture income more comprehensive. Its concerns about Punjab’s surplus shortfall was part of its delegation’s special visit, and this act may have helped allay its concerns, but there is no gainsaying that a genuine income tax on agricultural income is only fair.
