January 26, 2011

 

Pakistani agriculture industry enraged by tax on produce

 

 

Pakistani agriculturalists, who take a strong exception to its government that imposes 3.5% withholding tax (WHT) on agricultural produce, have said the levy will damage the liquidity of farmers.

 

Business communities also felt the same way. The middleman will either stop buying or charge the growers 3.5% WHT, thereby paying less for their produce.

 

They said the Federal Board of Revenue (FBR) has secretly imposed the WHT on agriculture produce through a SRO 1161(I) 2010, issued on December 31, 2010 and which is applicable from January 1, 2011.

 

While terming the decision detrimental to farming community interests, they urged the government to withdraw the SRO 1161(I) 2010 issued on December 31.

 

Farmers Associates Pakistan (FAP) Chairman Syed Hussain Jahania Gardez strongly resented the government's decision to levy withholding tax on agriculture produce.

 

Gardez said that the government contention that the levy would only affect the middleman is totally devoid of true facts because no farmer sells its produce direct.

 

He said this notification is self contradictory, as the sub-section (b) said that the agriculture produce was exempted from tax, but withholding tax imposition nullified the exemption.

 

Gardez said Pakistan's policy makers seem totally oblivious of the ground realities and make policies which turn out to be anti-farmer while totally ignoring the, facilities and concessions provided to the farmers in the neighbouring country India.

 

He urged the government to immediately take action and direct FBR to withdraw this SRO.

 

The Lahore Chamber of Commerce and Industry (LCCI) president Shahzad Ali Malik said that in the wake of highest-ever rate of inflation in the country, the government decision would hit the farming community badly since most of the buying in the agriculture sector is made through commission agent therefore the exemption available to the farmers would be meaningless.

 

He said that the LCCI wanted the withdrawal of the SRO 1161(I) 2010 because the imposition of 3.5%

 

Chairman Pakistan Poultry Association (NZ) Abdul Haye Mehta said that imposition of 3.5% withholding tax on trading of agricultural produce would result in increase in the prices of poultry feed and chicken meat.

 

Agricultural produce constitutes 60-65% of the poultry feed and imposition of withholding tax would result in increase of Rs 35 in the poultry feed bag and an addition of around PKR7-8 (US$0.08-US$0.09) per kg in the chicken meat prices.

 

Mehta stated that feed mills purchase required agricultural produce from grain markets. Corn, Broken Rice, Rice Polish and other things constitute 60-65% of the poultry feed.

 

There was no practice of purchasing agricultural produce directly from farmers in the poultry industry and millers have to go to commission agents. Millers have to deduct this tax, as the commission agents do not pay taxes, it would add to the cost of the produce of these feed mills.

 

At present, one poultry feed bag is costing PKR1,740 (US$20.28) per 50 kg bags on average and imposition of this withholding tax would add Rs 35 to this price. Ultimately, it would add from PKR7-8(US$0.08-US$0.09) per kg in the chicken meat price, which is the cheapest source of protein for the common man at present.

 

Mehta urged the government to immediately withdraw this decision to facilitate this important industry, farmers and the consumers.