“Impose tax on agriculture, not RGST: Altaf”

by admin

‘Hussain said the feudal system was damaging the country’s roots and that the Pakistani nation should stand up against it and get rid of it.
“Inflation has affected the people and we oppose the imposition of Reformed General Sales Tax (RGST). Instead, agricultural tax should be imposed on land owners,” Hussain added.’

MQM chief has suggested that government should propose an agricultural tax, instead of RGST. MQM, along with some opposition parties, have argued that RGST is a regressive tax, as it (proportionally) affects poor more than rich.* As such this increased tax is a burden on people and should not thus be imposed, on the currently applied GST.
Finance ministry responds that by stating this is a necessary tax increase, because of the pressures from IMF. Whose financial help is needed to balance the budget and keep country running. IMF demands an increased taxation, as Pakistan is one of the lowest tax paying country. Implied with this is that reason why sales tax  is suggested, instead of a progressive tax, because other direct forms of taxation have many loopholes/tax evasion and thus very little additional revenue would be collected.
As a compromise, MQM seems to suggest that Agricultural lands should be taxed. This suggestion seemingly is from same area of party, which had suggested the land reform bill. The bill which had so wide loopholes, elephants could walk through them.
This is in keeping with MQM’s ‘struggle’ against the evil power elites of Zameendars, Generals and Sarmayadars. This of course has nothing to do with that only Zameendars are also MQM’s political adversaries, and thus are singly targeted by the party, in land reform bill as well in this suggestion of increased taxation. To prove this, MQM also might have ideas against the Generals, like making Army incorporations pay additional corporation taxes, specifically considering they have built the empire on tax payer’s capital (originally given to sustain the army). Cutting down on the General’s presidential protocols, stipends and perks. Control on the expenditure of their budget etc. That bills would surely be proposed by MQM any coming day, just wait and see!

But MQM’s current suggestion, economically seems self-defeating. As observed, if main objection against RGST is plight of the poor, then introducing agricultural tax is going to make food more expensive. The landowner would sell his crop at higher price, this then would mean that crop is retailed at higher price. It effectively is same as taxing food directly. ‘Ah, but you see we can price fix crop at current prices, so as tax is paid from profits of land owners’.

Ahh well no one indulges in business to make loss, especially a business as fickle as agriculture. So you would see, one: less production and two: an emergence of crop black market. Remember how well we handled the black market for sugar? Now imagine black market for all agricultural produce! Of course, low produce also means increased import, which in turn means more trade deficit, which means more loans from IMF!
And I don’t know if Mr Hussain is aware, but Agricultural land is already taxed, its just that rate of tax collection is hideously low, which brings us back to the issue of correcting current system that to we do get the correct of amount of tax owed already to the state.

*  A poor person, who already has no saving, would have to choose between two items which one to buy. A rich person can afford to buy both expensive items, but will have less savings.

3 Comments to ““Impose tax on agriculture, not RGST: Altaf””

  1. Income tax by its nature is progressive. The maintenance of the public forces and the cost of administration should be equitably distributed among all the citizens in proportion to their means. Every sector should be taxed to ensure the fairness in taxation.

  2. There should be fairness in taxation. Everyone with income more than the tax threshold, currently Rs 300,000/year, should pay tax. Rs 300,000 earned through salary, trade, business or agriculture have the same buying power paying for the earner’s food, rent, medicines children’s education etc. So why should 300,000 earned from agriculture be practically tax exempt but taxed if it is from salary?

  3. Afik: There was a withhold exemption on agricultural produce that was removed two days ago – difference between taxing agricultural produce and other is that ultimately its the consumer who pays. And while you may survive without that new tv, a new shirt and such – you can’t live without eating –
    On the flip side, so much of tax already on agricultural lands and water etc is not recovered, similarly alot of tax on businesses etc is also isn’t recovered due to bad collection, corruption as well as loopholes in system- imo: these must be closed before additional taxes are proposed

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