REDUCING DEFICITS THE KEY ISSUE
SHABBIR H. KAZMI
June 13 - 19, 2011
The budget proposals presented by the finance minister faced a lot of anti-government slogan chanting in the national assembly. Therefore, the government is likely to face a huge challenge in getting the taxation measures approved from both the houses. The biggest obstacle will be maintaining expenditure and revenue equation. This time the budget deficit is estimated at mammoth one trillion rupees. A fragile economy, hostile lenders, and the ever-strong lobby of feudal lords are likely to force the government to resort to excessive local borrowing and/or printing of note.
The elected representatives are not ready to get any proposal approved in the assemblies which could: 1) help in documenting their income and 2) recovering tax from income clubbed under 'income from agriculture'. However, the point of satisfaction is growing consensus among the masses and even within the tax collectors that all sorts of income should be taxable irrespective of the source.
Lately, taxing agriculture income has been made a 'sensitive' issue, even by those who have nothing to do with agriculture, but are towing the line of the feudal lords. The objections being raised include: 1) federation should not talk about the issue as it is a provincial domain, 2) imposition of tax will destroy the small farmers and 3) above all it is the prerogative of the provincial assemblies to impose or not to impose tax on agriculture income. However, the finance minister has put an end to all the discussions by saying that the tax on income from agriculture is already in force. It is the provincial tax collection authorities, which have been failing miserably in collecting the tax.
The most disappointing factor is that tax collected on income from agriculture has gone down substantially in the recent past, despite substantial increase in agriculture produce and increase in support prices of wheat, sugarcane and the most colossal increase in the income of cotton growers.
Ironically, the tax collection regime has been structured in such a way that huge tax is charged on plant and machinery and raw materials and the income of salaried class but feudal lords do not pay even one-tenth of their liability. The facts are 1) to begin with most of the feudal lords don't submit income returns, 2) those who submit do not make proper disclosures, 3) farmers turned industrialists club all sorts of income under those heads which still enjoy tax exemptions.
A statement by Shahid Kardar, Governor State Bank of Pakistan had identified the growing tendency of people to club all sorts of income under 'income from agriculture' and claim exemption from paying income tax.
There is also greater realization that urban population pays bulk of the tax. Though, MNAs, MPAs, senators, and feudal lords also have properties in urban areas, where they spend most of the time but their names are not among the list of taxpayers of neither urban areas and nor the rural areas. Since they enjoy access to 'power corridors', tax collection regime also chooses to key its eyes closed to get 'fringe benefits'. Now the tax collection regime has identified 700,000 'big fish' and have also issued notices to about 7,000 individuals, it is expected and also stated by the finance minister that even if 100,000 individuals are brought under the tax net it would be a big achievement. During the post budget briefing, the minister tried to explain that all these people do not necessarily belong to urban areas because many of the feudal lords have been identified, living in these posh localities.
For the prevailing dismal situation, only the land revue department can be held responsible. Many of the federal and provincial departments have benefited from the technology but the most important department still has the most disorganized record. Some people hold the system, which has been inherited from the colonial rule for the most of the ills. In fact, they go to the extent of saying that not even one fourth of the record could be termed 'authentic' because rest of it has been tempered so badly that if one wishes to know how the title of his/her land holding has been transferred in the name of another person, it is almost impossible.
Under the colonial rule, Tehsildars and Patwaris were responsible for maintaining and updating land holding record. After the partition the system got completely disarrayed after the introduction of various land reforms, allocation of land to abadgars close to dams and barrages and distribution of government land among the 'turncoats' the entire system has been tampered so badly that now the most fertile lands is in the possession of these turncoats and their accomplices. While the government record shows that with the passage of time landholding has been fragmented to a level where most of the landowners fall in the category of small farmers, the reality is contradictory.
Most of the cultivable area of the country is in the possession of 'feudal lords' who believe in 'Qabza sacha kagaz ghota', meaning the land belongs to the person who has the physical possession and not the person who has the title. Most of the land, particularly thousands of acres of the most fertile of 'katcha' is in the physical possession of a few elites. They take almost the entire produce from those who work on their lands after paying minuscule amounts. Since the tile of these lands is not in the names of the feudal lords, nothing reflects as their earning.
Therefore, if the government is serious in imposing tax on all sorts of income irrespective of its source, the record of agriculture land holding, commercial and residential buildings has to be updated. Mother of all evils is 'benami' holding. Tax can only be collected from a person when the title is in his/her name and there is also appropriate disclosure. The land revenue department must come out of stone stage. Now even an ordinary person can identify the location of his/her house from Google Earth, can't the government take any advantage of this technology?