The Office of the Federal Tax Ombudsman (FTO) has caught landlords for evading tax on agriculture income. The FBR has sent notices many big landlords who were involved in tax evasion. These big landlords were not paying income tax on their agriculture incomes.
A study conducted by FTO found out that in order to avoid paying income tax, the landlords claimed tax exemptions from the FBR by declaring agriculture as the source of income. However, 75% of them gave false statements in their annual income tax returns as they did not pay tax in the provinces, according to the FTO’s findings.
“All over Pakistan, 9,352 taxpayers have shown agriculture income and 6,668 people have not paid provincial agriculture tax.” It added only 2,384 people – only one-fourth of the total declarations – actually paid provincial agriculture income tax during tax years 2016 and 2017.
The FTO’s findings are based on the data received from the FBR. There were about 55 cases where the source of income was forestry, fishing, poultry and dairy farming but these were declared as agriculture income, according to the FTO’s findings.
A former prime minister of Pakistan from Balochistan is among those who have been sent tax notices after he was apparently found making a false claim of paying provincial agriculture tax in order to claim exemption from the federal income tax, according to sources in the Federal Board of Revenue (FBR).
Among those who have declared agriculture income and also paid their taxes are a sitting federal minister, a former interior minister, a former Punjab governor and a former prime minister belonging to the PPP. Former president Asif Ali Zardari also paid agriculture income tax.
The share of agriculture in the economy is about one-fifth but its share in total revenues is less than 1%, indicating huge tax evasion in the sector.
In 2013, the FBR introduced an amendment in Section 111 of the Income Tax Ordinance 2001. The amendment was aimed at cracking down on those who evaded income tax by hiding behind agriculture income. However, the FBR did not take action against those landlords who claimed tax exemption on false statements that they had paid their due taxes in provinces.
Under the Constitution of Pakistan, the income from agriculture is a provincial subject – a lacuna that almost every influential landlord and industrialist exploits to evade taxes by claiming income from land.
The FTO’s findings showed that the FBR accepted the declarations of 9,352 people without any verification from the provincial authorities. The findings further showed that there was no liaison between the FBR and the provincial tax authorities.
About two years ago, the Punjab government had stopped collection of income-based component of agriculture tax through an executive order. It took the step under pressure from big landlords and politicians ahead of general elections.
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17 November, 2019