AGRICULTURE TAX ON FEUDALS: IS IT POSSIBLE AT ALL?
Is the Constitution not clear on the subject of 'jurisdiction'?
From SHAMIM A. RIZVI, IslamabadThe feudal lords of the Punjab dominating the provincial assembly have once again united to blackmail the government by refusing to introduce tax on farm income in the budget for 1996-97.
Jun 29 - Jul 05, 1996
Under immense pressure of the IMF and other donor agencies and mounting resentment within the country, the federal government made a firm commitment 2 months back to bring farm income into the tax net in the coming budget and strongly recommended to the provincial governments that they should honour its commitment. While the other three provinces have made a start, however small, in response to desperate efforts of the federal government, Punjab the biggest province has chosen to ignore completely this absolute imperative. Mukhdoom Shahabuddin, federal minister of state for finance, announced on the floor of the National Assembly last month that "a broad-based taxation system for agriculture sector will be announced in the coming budget. Since the subject falls within the purview of the provincial government, the federal government cannot legislate upon it. The provincial governments have been firmly asked to take necessary legislative measures in the coming budget. Since, Balochistan, the only province where PPP did not have its government, had already introduced the bill, it was expected that there will be no problem in implementing the federal government's decision in the remaining three provinces where PPP has her own or coalition governments. Although the steps taken by NWFP and Sindh are half-hearted measures and the low rates of levy do not reflect the serious financial crunch the government was faced with, which was forcing taxation even on the poor people, the blatant 'No' by the feudal lobby in the Punjab assembly is really shocking.
The chief minister of the Punjab has expressed his helplessness. The Punjab finance minister Afzal Sindhu had been more specific in explaining the hleplessness. He said that southern Punjab is the strong-hold of the ruling party and it cannot afford to lose the support of its legislators from this area. It seems that the southern Punjab is also the stronghold of big land-owners who have decided to put their own interests on top to the exclusion of everything else, let alone the interests of people they are supposed to represent. This is not the upper limit of their selfishness and indifference to the national interests. It is only indicative of a frame of mind typical of the exploiters and self-seekers who will not bat an eyelid to compromise national interest if it is in conflict with their own.
Land reforms are required not only to generate more revenue, but also to avert the catastrophic collapse of the entire system which simply cannot take anymore beating. It is not possible to run the system on just eight million tax payers, three million of whom are government servants. Decidedly all these eight million have now reached the limit of endurance. Also, it is time to save the myopic land-owners from themselves too, because the system they are clinging to so desperately is about to blow up. It is true that the assembly of a federating unit is free to accept or reject a federal proposal. But the federation can exercise its control through a plethora of instruments at its disposal. The federal government has to agree to the conditionalities of the IMF in exchange for financial assistance. The same way the federation can impose its conditionalities in exchange for its financial assistance to the provinces. The US government does the same to influence the policies of the federating units without appearing to be doing so.
The whole issue of imposition of income tax on agriculture has had a chequered history marked by an intense debate both within the government and outside of it. Those who had been in favour of such a tax, pleaded that exemption from tax to the landlords militated against the concept of equity. They argued that since everyone with an income over and above the exemption limit was taxed, the landlords should also be made to pay their due share in direct taxes. Yet another argument was that the incidence of direct taxes has remained low with the result that the burden of fresh taxation year after year fell on the consumers through successive increases in indirect taxes; lately the issue had been taken up by the donor agencies and they also started insisting on bringing the large agricultural income within the tax net. An opinion in its favour had been building up among the cross-section of the society.
However, the agriculturists themselves, particularly the feudal Lobby were opposed to this kind of tax on the ground that they did not get adequate return for their crops and hence it involved a net transfer of resources from agriculture to the non-agriculture sector. They said that incomes from this sector were also dependent on crop being good or otherwise, and there was no certainty about them. Agricultural inputs had also tended to become costly raising the cost of production. The taxation commissions, which looked into this issue were of the opinion that tax on agricultural incomes was necessary to bring about equity in the taxation structure but left it for the government to take a final decision.
In view of strong public demand to bring the income from agriculture into the tax net, the care-taker government of Moeen Qureshi enforced the ordinance levying a nominal tax on agricultural income and this step of the federal government was regularised by issuance of similar ordinances by the four provincial governments. When the Benazir government came into power, it did not put the ordinance before the assembly and so the ordinance lapsed. Since then a debate, rather a controversy, started in the national press on this issue which forced the government to appoint a task force to study the issue in the context of other related issues and demands of landlords. In its report, the task force while accepting the levy of tax on agricultural income demanded a number of concessions and facilities for the farming sector. The report was approved by the cabinet asking the provincial governments to move a bill to legalise the levy on agriculture income. While measures have been taken or are being taken to implement all other recommendations of the task force by the federal and provincial governments, the question of taxing agricultural income was left where it was.
According to Edward Broadbent, president of the International Center for Human Rights and Democratic Development, the absence of income tax on the majority of the population is a major problem for democracy in Pakistan. He observes that absence of any tax on agricultural income has created a landed elite which sponges on the state and all its organs. It is prepared to defend its interests with the guns of the state, particularly against urban population.
He adds the choice is to confine pursuing their self-interest and precipitate the breakdown of the state itself or act in greater interest of the country. When elites do not reform, revolution has often been the response of the masses, concludes Broadbent.
The argument that the federal government cannot legislate on the issue as it falls within the purview of provincial jurisdiction is frivolous. Constitutionally it may be true, but may we ask the federal government if the maintenance of law and order falls under its purview? Certainly, not. Then, why has it deployed Rangers in Sindh under the command of a federal minister? Is it not a case of double standards that where the government wants to take action it ignores Constitutional provisions and where it lacks interest it takes shelter behind the Constitution.
Secondly, if it is accepted that provincial autonomy is a touchy area and the federal government should not over-step its limits, there are other channels too, to achieve the goal. Fortunately, at the moment Pakistan People's Party is ruling at the centre as well as in three major provinces barring Balochistan which has very little agriculture. The central leadership of the party can direct its provincial branches to get a bill approved from the provincial legislatures to this effect.
Besides taxing the farm income, it is high time to introduce land reforms and dispassionately implement the same to dismantle the exploitative control and sterilise it of its blackmailing potential. It is no longer a secret that the big landowners effectively neutralised all the reforms and held on to lands far in excess of the permissible limits. In papers, they distributed lands not only among their relatives but also to their peasants, who are their virtual slaves and family servants, to bring the size of the holdings within the legal limits. To retain their control on land transferred to their poor subjects, they have entered into separate legal deals, loans, etc, to keep them under the thumb. A scrutiny of revenue records and actual possession would reveal interesting facts. In most of the cases the poor illiterate peasants do not even know what they are putting their thumb impression on. As the minor family members of the landlords grow up, the lands in the names of the peasants are 'sold' to the adult offsprings on the basis of the stamped papers already in their possession.