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| AGRICULTURE TRIBUNE | Monday, November 18, 2002,
Chandigarh, India |
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Farmers hate it, others rub hands with glee Taxman upbeat |
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Farmers hate it, others rub hands with glee The proposal of the Kelkar committee on direct and indirect taxes to tax the agriculture sector has evoked mixed response, going by statements from a cross-section of the society. While those associated with trade and industry are in favour of the recommendations that propose to bring big farmers into the tax bracket, agriculturists themselves are skeptical and feel that taxing farmers will cripple agriculture that is already passing through a very difficult period. Since taxing the agriculture sector falls directly under the purview of the state government, the Kelkar committee has recommended that the big farmers should be included among those paying income tax. The money collected can then be returned to the state governments to help them build their infrastructure, says Dr Vijay Kelkar. Supporters of Dr Kelkar’s economic policies feel that wealth from any source should be treated equally and there should be no special concession to any sector, may it be agriculture. On the contrary, those actually involved in agriculture feel that small land holdings and high cost of inputs have made farming a non-viable proposition and burden on the farmers will not only push the small and marginal farmers further into debt, but also force many farmers to close shop and look for alternate avenues of livelihood. While the debate is gaining momentum, many feel that the recommendation is unlikely to see the light of the day due to strong opposition from political leadership spread across the predominantly agrarian nation.
"Money earned from any source should be treated equally for the purpose of taxation," says Mr Avtar Singh, general secretary, Chamber of Industrial and Commercial Undertakings. Describing the proposal to tax the agriculture sector as a very positive step for the country’s economy, he says though people may view the recommendation harshly at the moment, in the long run it would be very beneficial to the nation’s economy. He says that the system must be streamlined and anyone making money from any source must be brought under the purview of income tax based on a uniform slab.
Mr V.K. Goyal, chief executive of Vardhman Spinning Mills, too says, "Wealth is wealth and must be taxed. The government must introduce slabs of taxation and anyone who falls under the established norms must pay tax irrespective of his source of income." He says that farmers also use the state’s resources like any other citizen and must therefore contribute to infrastructure development by paying income tax. He, however, goes on to remove some misnomers about the recommendations of the Kelkar committee by saying that most small farmers would be automatically eliminated out of the tax bracket if they do not fall under the first proposed slab under which no person with an income of less than Rs1 lakh will have to pay tax. "Why should a farmer with an income of Rs 5 lakh not pay income tax?" he questions.
A progressive farmer from Malwa, Mr Gurbir Singh Sandhu, does not go with the recommendations. He says, "Agriculture has already become a non-viable proposition due to rising costs of input and lower yields. There is no certainty about the kind of harvest one is going to get and in days to come cheaper imports of food grains may further push the farmers against the wall. Any proposal to tax the farmers would only send farmers deeper in debt". He is of the opinion that before the government accepts the proposal of imposing tax on farmers it must ensure that systems such as crop insurance and uniform assured returns must be well in place. Also, Mr Sandhu questions the practicality of this recommendation as hardly any farmer would be able to maintain meticulous records of his income and expenses.
However, Mr Arvind Modi, himself a member of the Task Force, says that it will not be difficult to separate the small farmers from the big ones. Though no specialised system has been worked out for the purpose, Mr Modi says that like in all other cases there are basically four parameters on the basis of which rich farmers would be identified and asked to pay tax if they do not do so voluntarily. These four ways to separate a rich person from one who is not so wealthy are looking at the cost of inputs, records at the place where the produce is sold, deposits in banks and other institutions and tracking high value expenditures. He, however, adds that since taxing agriculture is a state subject, recommending the taxing of agriculture does not fall under the purview of the Task Force. But if the rich farmers are brought under income tax, the money thus collected can be returned to the state governments for infrastructure development or any other purpose. There seems to be total unanimity among the farmers on the issue with all of them strongly opposing the proposal. Mr Jagjit Singh Hara, who has been awarded with Padam Shree for his outstanding contribution to agriculture, questions the rationale behind imposing tax on farmers. He says the government should first find out if farmers are really in a position to pay the tax or not. "If you want to take blood from someone, you must be sure that person is healthy enough to donate it, otherwise you are going to kill him. The same thing will happen to farmers as they are not in a position to pay the taxes…and if you still try to extract taxes from them they will obviously be killed," he adds. Mr Hara has served on the Board of Management of the Punjab Agricultural University for a long time and is himself a postgraduate in economics. He believes that taxing farmers at this stage is no good economics. In a similar vein, Mr S.S. Kooner, another progressive and well-to-do farmer, shares the concern of the agriculture sector. He apprehends that people will no longer be inclined to invest in agriculture or related sectors. He points out, "due to the heavy losses people are already reluctant to invest in agriculture and if you start taxing the agriculture sector the investments will go down further and obviously the production would be adversely hit". Mr Kooner exports seeds and has a flourishing business. He seeks to differentiate between agricultural income and other income. He does not agree with the argument that agricultural income should be treated on a par with industrial income. He explains, "you need massive investment in industry in terms of infrastructure like roads, ports, electricity and so many other things...but what do you invest for agriculture, not so much…" Besides, he points out massive subsidies provided to industries in various forms. Both Mr Hara and Mr Kooner maintain
that agriculture is the basis of the country’s economy. It serves as
the backbone for the national economy and needs to be strengthened.
Taxing agricultural economy, they say, will not just harm agriculture,
but the total economy of the country. They say these recommendations
on taxing agriculture must not be accepted at any cost. No matter what
is the political fallout, it will have disastrous economic fallout for
the farmers who are already reeling under massive debts and many of
whom have even committed suicides.
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Taxman upbeat
There is no good news for agriculturalists across the country. If the recommendations of the Kelkar committee on direct and indirect taxes are accepted by the government, agricultural income will no longer be exempt from income tax. So far all kinds of agricultural income in the country were exempt from income tax. Dr Vijay Kelkar, Chairman of the Special Task Force of the Finance Ministry on direct and indirect taxes, believes there is nothing wrong in it. "It is part of the rationalisation process being carried out at the macro economic level," he told The Tribune in an interview at Ludhiana. He believes the task force has kept the national economic interest foremost. He argues there is no dichotomy between the individual economic interest and the national economic interest as both are complimentary to each other. "We have tried to reconcile the two without any harm or loss to anyone," he observed, while commenting on his proposals to tax the farm sector, which should not cause any concern in any section. His recommendations have got widespread approval from the industry, which believes that there is no reason why agricultural income should not be taxed. To the task force an income is an income, no matter what source it comes from. Obviously, like big businessmen, it would only be the big farmers who would come in the tax net. Those with incomes of less than Rs1 lakh will automatically be exempted along with others, the task force explains. To counter any resistance from state governments or political parties, Dr Kelkar argues that the revenue generated after taxing the agriculture sector will go to the state government only, as agriculture is a state subject. It will add to resource generation of the states and it would be up to them as how to use it. He also clarifies the doubts about assessing the agriculture income. There are several methods like assessing the input costs, taking note of the sales of the produce in the market, bank deposits and accumulation of wealth and also the level of expenditure by a farmer, which would be monitored by the Income Tax Department. These parameters will form the basis for assessing agriculture income. If the confidence of the task force
members, including Dr Kelkar, and the widespread approval from the
industry is any indication, the government is all set to accept most
of the recommendations, including taxing the agricultural income, no
matter what its political fallout may be. —NSG |
Move part of
rationalisation process.