This was the outcome of the first meeting of the Economic Advisory Council (EAC), headed by Dr Hafeez Pasha and comprising former finance minister Shaukat Tarin, former industries minister Jehangir Khan Tarin, former State Bank governor Salim Raza, Dr Ijaz Nabi, Nasim Beg, Farooq Rahmatullah, Ali Habib, Shahnaz Wazir Ali and others.
Finance Minister Dr Abdul Hafeez Shaikh presided over the meeting. It was also attended by State Bank Governor Shahid Kardar and Deputy Chairman of the Planning Commission, Dr Nadeemul Haq.
According to a statement issued by the finance ministry, the council discussed the idea of taxing all incomes irrespective of the source of origin, including agriculture and services sectors.
A participant told Dawn that almost all members were of the view that agriculture was a provincial subject and, therefore, all provincial finance ministers should be invited to the next EAC meeting. But before that, they suggested, notices should be issued to big landholders to file tax returns to show the government’s resolve for introducing an equitable tax system.
The meeting decided to hold consultations at the provincial level to also engage the chief ministers in the proposed plan because the provinces had a major role in public finances after the 18th Amendment and the 7th National Finance Commission.
At the same time, the participants were of the opinion that agricultural value chain like wholesalers and middlemen was very much in the federal domain and it should be taxed by the centre.
The meeting also noted that already there were provincial taxes on agricultural incomes and the government would have to tax this sector if it wanted to ward off other pressure groups which had created an impression that urban populations were being penalized through the reformed general sales tax without bringing rural incomes into the tax net.
The meeting was informed that all provincial governments had introduced the land revenue act in 2000 to tax agricultural income through verification of growers’ incomes, but had done nothing to collect such taxes.
Under the act, an income of Rs80,000 per crop has been exempted from the tax, while five per cent tax is applicable on an income of Rs100,000, 10 per cent on income up to Rs200,000 and 15 per cent on all agricultural incomes exceeding Rs200,000.
The EAC members warned the government that they would stay away from future consultations if their recommendations were not made part of the next budget because they were contributing their time and expertise in the larger economic interests of the country.
“We have come together to try to sort out economic difficulties and will defend the budget if our consensus recommendations are adopted,” one participant told the finance minister.
Dr Hafeez agreed to oblige.
There was a broad consensus among participants that the next budget should be “growth-oriented” and aim at increasing revenues, and not only concern itself about meeting the requirements of the International Monetary Fund.
A council member said the EAC had expressed concern over an ambitious revenue target of Rs1,604 billion recently set by the government. The council was of the opinion that the tax machinery would at best be able to collect Rs1,530 billion.
It advised the government to avoid imposing new taxes before June if there was a shortfall in revenue and instead focus on audit recoveries and other administrative measures.The PC deputy chairman said the country needed to achieve a growth rate of at least eight per cent of GDP to provide jobs to the increasing number of young people joining the market
