The Pakistan government is considering imposing a federal tax on agricultural income to meet a demand by the International Monetary Fund (IMF) and legal experts say it is possible without amending the Constitution, Express Tribune reported.
The proposal has been discussed between Pakistan and the IMF and a draft of the legal amendment has also been prepared.
Pakistan tax authorities have told the IMF that the legal amendment could be introduced in the 4th Tax Laws Amendment Ordinance.
The sources said that during the review talks, a major demand by the IMF was to bring the agricultural sector under the federal tax domain.
However, the two sides were unable to agree upon the memorandum for economic policies (MEFP).
“The agricultural income can be brought into the federal tax net without a constitutional amendment,” Federal Law and Justice Minister Farogh Naseem told The Express Tribune.
The Federal Board of Revenue (FBR) Chairman and the Finance Adviser have already taken up the issue with the Law Minister, the report said
However, it is unclear as to whether or not Pakistan Prime Minister Imran Khan would clear the proposal amid the increasing political and economic instability in the country.
Under the 1973 Constitution, the federal government could not impose tax on agricultural income as the matter fell in the provincial domain, the report said.
However, the provincial governments, over a period of time, shied away from the matter due to the influence of landlords, it added.
The federal government in consultation with the law ministry has found a solution where the federal income tax can be imposed on the agricultural income by only amending the Income Tax Ordinance of 2001.
They said the tax authorities were considering restricting the definition of agricultural income to only income from “crops” by amending Section 41 of the income tax law.