Self-assessment for farm
Mohammad Ali Khan
July 18, 2011: THE Khyber Pakhtunkhwa government is working
on a scheme to introduce a self-assessment for agriculture
income taxpayers to widen the tax base and improve
The Board of Revenue (BoR) responsible for collecting this
levy, will opt for the new mode of tax collection after
chief minister’s approval, a senior official tells Dawn. The
move is supported by the federal government and the Federal
Board of Revenue is likely to lend a helping hand.
The provincial government has been collecting the
agricultural income tax (AIT) since long. However, its
overall contribution to tax collection remains less than 0.5
per cent of the provincial tax revenue, owing to ineffective
For FY2011-12, the provincial government has set an overall
target of Rs3.6 billion of which the expected recoveries
from AIT will be merely Rs21 million despite agriculture’s
substantial contribution to the provincial GDP.
“We do not have exact data on the actual share of the
agriculture sector in the provincial GDP, as it is not
calculated at the provincial level, but 68 per cent of the
economy is rural based with agriculture as an important
component,” the official explains. He was making the point
that farming has a huge potential to pay income tax.
Currently only 112 persons pay the AIT across the province
and surprisingly in the Peshawar valley, the food basket of
the province, hardly nine persons pay this tax. They are
earning decent income, with the spiraling prices of
vegetable, fruits, and other farm produce.
Citing proposals sent to the chief minister, the official
says the government’s plan is to encourage growers to pay
the tax as per worked out self assessment scheme.
According to the new procedure, growers including tenants
will be asked to file their annual returns, showing their
expenditures, sales and profit, with the Deputy District
Officer (Revenue). On the basis of this return, income tax
will be collected from them.
In case, the official explains, growers are found hiding
their actual income, they will face high penalties. The
important aspect of these measures is that both the
landowners and the ‘tenants’ (in case the land has been
leased out), will pay the tax unlike land revenue which is
only paid by land owners, the official says.
Currently, the AIT is wrongly collected on flat rates basis,
which in fact, has been devised for the Land Revenue Tax (LRT)
by the revenue official in the field, resulting in losses to
provincial kitty. The Agriculture Policy-2005 had exempted
5-acre agricultural land from LRT.
The revenue officials are required to compile an yearly
report on the quantum of agriculture produce in their
respective districts and also the cost and income of
growers. But they do follow the rules, the official laments.
The new collection mechanism including documenting of
records will be a challenge, both for the tax collectors and
While there is no need for a separate arrangement to be put
in place for filing AIT returns given the current provision
of law, the capacity of the revenue officials responsible
for the job remains lacking. Officials working at Tehsil and
district levels do not exactly know how to calculate the
tax, keeping in view the cost of production and the expected
returns from a farm.
Also, collection of AIT is considered by the revenue
officials as a secondary job, because the handling of
revenue record is the most lucrative pursuit for them.
The FBR has been approached to give basic training to these
revenue officials as how to compute farm incomes on the
basis of returns to be filed by growers.
Another major issue is that a majority of growers are
illiterate and are unable to keep a record of expenses,
sales and returns, which they will have to do once this new
system is introduced.
“It is difficult to get the growers to file their returns
not only because they do not know how to maintain records,
but also due to the general mindset concerning paying
taxes,” argues the official.
The real issue is of the political will that is required for
pushing hard the collection of this tax, but that too is
missing for fear of a political backlash.
Courtesy: The DAWN