NEW DELHI: The idea of taxing farm income that has rattled the government this week, was born at 2, rue Andre Pascal in Paris sometime late 2016. The Videshi idea for Desi implementation was later imported to the Finance Ministry in a confidential draft report on Indian Economy.
The Sunday Standard has dug out the report of Paris-headquartered, Organization for Economic Co-operation and Development (OECD), which said the Agriculture income in India is untaxed, while it accounts for about 50 per cent of total employment and 18 per cent of India’s value added. The draft report with the finance ministry further said that most farmers are small and earn very little income, however, some are wealthy and could pay income tax.
“Not taxing agricultural income creates an incentive to keep resources in a sector with low productivity or to declare non-agricultural income as agricultural income. The political economy of removing this exemption would likely be challenging,” the report said adding that the ‘constitution currently provides the right to tax agriculture solely to the states and not to the Central government.’
“A Communication campaign would however, help emphasizing that most agricultural workers would not be affected as they would remain in the (generous) zero rate tax bracket,” the inter-governmental organization on economy had recommended. The organization favoured bringing India’s personal income tax thresholds more into line with other emerging economies.