ISLAMABAD, Jan 23: The Federal Board of Revenue (FBR) has finalised a framework for improving the mechanism of tax collection from the agriculture sector from the next fiscal year, officials told Dawn on Friday.

Tax collection from the agriculture sector is proposed to be raised to around Rs70 billion in the first year of implementation from the current collection of Rs2 billion.

A senior official in the FBR said that the actual potential of tax collection from the sector is estimated at Rs200 billion.

Though the agriculture tax is a provincial subject, the FBR would extend its technical assistance to provincial land revenue departments in the collection of the levy.

Statistics showed that collection of agriculture income tax by provinces stood at Rs2 billion last year while contribution of the agriculture sector in the GDP was about 22 per cent.

According to the official, low taxes from the agriculture sector indicated that the entire value-added chain in the agriculture sector was nearly exempted from taxes.

The FBR official said that the Fiscal Research and Statistics Wing of FBR has prepared a framework according to which agriculture income tax would be collected on the basis of income generated from the sale of agriculture produce.

He said that the advisor to Prime Minister on Finance Shaukat Tarin in a meeting with the FBR chairman Waqar Ahmed has discussed the framework, and the advisor agreed to take up the issue with the prime minister for approval.

The official said the framework laid down the mechanism and percentage of taxes on different crops. FBR would appoint its officials in the land revenue departments under the proposed framework, added the official.

Presently, the provincial governments are collecting tax but not on the income earned through the crops sale.

As per land revenue act, the non-irrigated area up to 25 acres was exempted from income tax and the irrigated area up to 12.5 acres was exempted from the tax.

Provincial governments charge Rs150 per acre from the irrigated area and Rs100 per acre from non-irrigated land. Therefore, the FBR estimates that it could generate Rs70 to Rs80 billion additionally through collection of tax on the basis of income as compared to the ‘land basis’ formula.

According to FBR official, the agriculture income tax would be collected at the stage when farmers would bring crops for sale at various points, for instance dealers, mills and Trading Corporation of Pakistan.

The laid down framework also analyzes the expenditure that will occur on collection of agriculture income tax, the official said and added that the tax collection cost would be lesser than the provincial land revenue departments currently spending on the collection of agriculture tax.