Farm Income

LETTERS TO THE EDITOR

your issue dated January 26, has carried a report on Assochams recommendation that agricultural income should be taxed with the object of widening the direct tax base. This is a very popular theme supported by a large number of businessmen, economists and even the World Bank and IMF.

There appears to be no country in the world collecting any significant amount of tax in respect of agricultural income. Advocates of this policy should first try to find out if there is any such country.

The US has the largest agricultural output in the world but it has almost never been able to collect income-tax from this sector. During the last half a century, there have been very few years in which the total agricultural income assessed was more than the losses assessed. And even when the net result was positive it was only a negligible amount. In 1994, (latest year for which data has been published) net income assessed in respect of agriculture was $8.4 billion and the loss was $15.7 billion (Source: Page 137 of Statistics of Income Bulletin, Spring 1997 edition published by IRS, Washington DC).

If income-tax is extended to the agricultural sector in India, the main beneficiaries will be the inspectors (and also tax advisers who will harass semi-educated and illiterate farmers and collect bribes from theme). Under IMF pressure (based on sheer ignorance), Pakistan has recently extended income-tax to agriculture, but it is sure to soon regret the decision.