Only four new shopkeepers opted for the fixed tax scheme until the statutory deadline, and Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial admitted that the response remained below expectations, saying traders had “defeated the good faith” of the government.
The government also gave a 15-day extension in filing all tax returns after receiving 5.7 million returns by the September 30 deadline, against 19 million registered taxpayers. The chairman, however, said filers were 1.7 million more than in September last year.
The poor response to the traders’ scheme coincided with the close of the first quarter of the current fiscal year, during which the FBR managed to meet the quarterly target of Rs. 3.03 trillion, strengthening its bargaining position with the International Monetary Fund (IMF). Overall return filers stood at 5.7 million until the statutory deadline, compared with 19 million registered taxpayers.
Headed by Senator Saleem Mandviwalla of the PPP, the Senate Standing Committee on Finance received a detailed briefing from Minister of State for Finance Bilal Azhar Kayani and the FBR chairman on the new fixed tax scheme.
“We are worried that the response to the tax scheme remained below our expectations,” said Langrial while responding to a question. FBR’s Member Operations Zubair Bilal said 787 tax returns had so far been filed under the new scheme, of which only four were new filers. Kayani, the main architect of the scheme, however, was hopeful it would pick up momentum once the FBR started chasing traders, revealing that there were technical glitches in the application launched to facilitate first-time filers.
“If the traders do not opt for the scheme and even the fines prove insufficient to convince them, then strong enforcement measures would have to be taken,” said Kayani, hoping the FBR would now go to the field to create awareness of the new scheme.
When the committee decided to review the implementation status after one month, Langrial said there was a possibility the situation might remain the same. “Good faith has been defeated” by the traders, he said, adding that glitches in filing applications were merely an excuse for not filing returns.
The government had launched the 1 per cent fixed tax scheme, offering retailers a nominal tax in return for complete exemption from audit and installation of Point of Sales systems.
It was the best-ever scheme offered to any segment in the country, remarked Kayani. “The traders’ issue dates back to before my birth and the new scheme is still at the initial stage,” he said, hoping the response would grow once the government started imposing fines.
To a question from PML-N Senator Anusha Rahman about whether the FBR had prepared a list of non-compliant traders, FBR’s Member Strategic Transformation Dr Hamid Ateeq Sarwar only said all those who would not file returns would be chased.
To another question, Sarwar said the government was targeting to bring 500,000 to one million traders into the tax net out of the 3.7 million who were outside the system. Responding to a query about collecting Rs. 50 billion from traders in the current year, the FBR chairman said that if the scheme remained successful, the collection should be over Rs. 100 billion, but if it failed, there would be negligible payments.
Kayani stated that the government had consulted traders and introduced the scheme accordingly. He added that within two months, 10,338 retailers registered through the application, covering traders with annual sales of up to Rs. 200 million. Of these, 2,337 were new, but only a very few filed returns.
The committee was informed that penalties would initially be imposed in stages, with fines of Rs. 10,000 at the first stage, Rs. 25,000 at the second stage, and Rs. 50,000 at the third stage. The FBR chairman stressed that extensive awareness campaigns had already been launched and noted that there was still a perception among some traders that those who did not register through the application would not face penalties.
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