Farmers propose a “permanent tax system” for the agricultural sector

ISLAMABAD: Farmer representatives have proposed a ‘Fixed Tax Scheme’ for the agriculture sector along with documentation of the supply chain within the sector in the upcoming budget (2024-25).

The views were shared by farmers’ representatives during the consultation discussion entitled: “Pre-Budget Seminar: Tax Reforms in the Agriculture, Retail and Real Estate Sectors” organized by the Sustainable Development Policy Institute (SDPI).

On Monday, during a pre-budget consultative session, Afaq Tiwana, director general of the Pakistan Farmers Association, said the three sectors in question face a common challenge of bringing the informal sector under the tax regime. He mentioned that the agriculture sector pays taxes at three levels, which also includes the tax return issued by Patwari, which levies a cumulative tax of 15%.

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He added that although it is an informal sector, its land records have been digitized and its economy is digitally documented. “Taxation should be fair with the deregulation of the agricultural sector, which is important because the government should reduce its involvement in our system and bring us into the tax net, which should be a voluntary permanent tax system,” he said.

The speakers also demanded that the government provide a dedicated track and trace system to bring retailers and businesses from informal sectors covered by progressive taxes into the tax net to generate revenue from untaxed sectors.

In his introductory remarks, Dr. Abid Qaiyum Suleri, Executive Director of SDPI, stated that the consultation was convened to observe over-stretched sectors in the budget, while the International Monetary Fund (IMF) in its discussions emphasized the inclusion of real estate, IT and agriculture sectors under tax net.

Dr Suleri stressed that it was necessary to reveal the bottlenecks faced by the above three sectors in paying taxes as they were important not only for the upcoming budget but also in the run-up to the negotiations with the IMF to provide a full picture of the current tax status and the impact proposed tax plan. He added that these sectors are willing to pay taxes and it is necessary to take into account their suggestions in policy-making processes.

Dr. Vaqar Ahmed, Co-Executive Director, SDPI added that it will show the economic trajectory in the next 2-3 years. “We discussed three sectors: retail, agriculture and real estate.

A large informal sector, challenges in implementing track and trace systems, the Federal Board of Revenue’s (FBR) POS system and the growing number of online sellers evading taxes contribute to difficulties in tax collection in the retail sector.

While discussions on permanent taxes on retailers continue, the question of fairness and progressivity in such a system remains unanswered,” he added. Dr. Vaqar mentioned that due to the informal nature of the agriculture sector, calculating and collecting the actual tax liability in this sector has proven difficult. He added that technology-based solutions offer promising solutions to improve accuracy.

Ahsan Malik, senior real estate analyst, said there is a trust deficit between regulators and the non-tax-paying sectors, which needs to be addressed through a fair and progressive tax system. He added that FBR’s regulatory and enforcement measures further erode the confidence of the masses as tax paying entities and non-tax paying entities should be treated separately. He added that development and housing societies running and thriving businesses in this sector avoided paying taxes because their real estate partners did not want to pay for the government’s inefficiency and incompetence.

“Local industries should be promoted and imported luxury products should be taxed. We need to give space to small farmers and retailers. The new system should reduce the burden on already taxed sectors,” Malik said.

Sumera Abbasi, executive director of TiE, said there was a need to ensure clarity among start-ups and small businesses with relevant categories of retailers to ensure an inclusive tax system. She said many retailers, especially poor women, avoid paying taxes because of the labor-intensive paperwork that makes women entrepreneurs disinterested in taxes.

She added that strict tax regulatory systems did not provide a favorable environment for the development of start-ups. Compliance costs need to be reduced and made fair for the local masses, while women in startups are not discussed during the budget, this should be discussed more clearly, Sumera Abbasi added.