Apples and oranges, really. The reform of the GST and agriculture tax are two entirely different issues within the states system of revenue collection. One doesnt figure in a discussion on the other. Yet, political parties like the MQM somehow made the connection. There wont be a reform of the GST until there is a system in place to effectively tax agricultural income, declared the party. Big business, long having outstripped large landholdings (the few that are left) has a host of pressure groups and even political parties at its disposal. The reform of the GST, hence, has been effectively blocked by the curious insistence of taxing agriculture first. Lets tax neither was the implicit message, considering the presence of the landholding elite in the ruling PPPs parliamentary profile.
Well, there just may be a development on that front. The government has agreed to a suggestion made by its top economic advisers to finally tax farm income. Agriculture is a provincial issue so much lies in the hands of the provinces. That shouldnt be a problem because all of the provinces have already passed a land revenue act under which a three-slab tax structure exists on all agricultural income above a stipulated minimum. The provinces, however, have failed to follow up on that in tangible terms. In the meeting of the Economic Advisor Council and top financial mandarins of the government, it was decided to direct the provincial governments to ask all landowners whose land ownership exceeds 50 acres to file tax returns.
Though the step is sure to increase the revenues of our cash-strapped government, one of the biggest, if unrelated, arguments against the reform of the GST would also ostensibly appear to be out of the way. The increased ability to document the economy and build up a database for the collection of income tax is the actual utility of a GST reformed along the lines of a value added tax. Structural improvements in our revenue collection system are way overdue.
