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The Federal Board of Revenue (FBR) will not share income tax returns with provincial governments, as they are considered private under Section 216 of the Income Tax Ordinance (ITO). This decision comes amid ongoing disagreements over the taxation of income from agriculture and livestock.
Reportedly, this matter was deliberated in a recent meeting of the National Tax Council (NTC) presided over by Muhammad Aurangzeb, the Minister of Finance. The minister of finance emphasized the importance of the federal and provincial governments sharing data with each other, particularly on income taxes.
However, officials from the Federal Board of Revenue (FBR) made it clear that, due to legal limits, it was not possible to provide comprehensive returns. Their willingness to contribute specific data, including agricultural and property income, is evidence of their interest in contributing to the province’s revenue production efforts.
In order to combat tax cheating, in which people mistakenly report business income as agricultural income, FBR Chairman Rashid Langrial informed the provinces that they would review their data requests individually to determine their significance.
There is a huge disparity between the federal personal income tax rate of 50% and the maximum rate of 15% for agricultural revenue. Pakistan is under pressure from the IMF to bring agricultural tax rates in line with federal ones.
The Tax Laws Amendment Bill, which is now introduced in the National Assembly, proposes that the federal government provide commercial banks and private auditors access to taxpayer data by amending Section 216 of the ITO.
The current Memorandums of Understanding (MoUs) on data sharing between federal and provincial governments, which were made as part of a World Bank loan agreement, need to be changed as well.
The inclusion of animal revenue in Punjab’s farm tax bill, which was passed last month under IMF terms, is a major cause of contention.
Livestock are considered a federal matter and so cannot be taxed as agricultural income under provincial legislation, according to FBR authorities.
Provincial officials claimed the assembly had previously authorized the bill, despite the federal finance minister’s requests for changes. In order to bring provincial agricultural legislation in line with federal income tax requirements, the subject was presented to the NTC’s executive committee.
