Government has decided to allay the misgivings of traders about the broadening of tax net by bringing retail trade under it under the economy documentation drive. A notification will be issued to constitute committees comprising representatives of traders and officials of tax department .across the country to register business houses which are out of the tax net. In big and medium cities, each market will have a committee which includes two members from traders and one from tax department.
The economy documentation drive hit snags when traders went on strike in August against registration either under sales tax regime or income tax regime. The protest took a political dimension when opposition political parties gave it support. Consequently, Federal Board of Revenue (FBR) had to partially concede traders’ demands pertaining to the documentation of economy. The board had already notified draft schemes on simplified tax regime, fixed tax regime for small shops and issuance of business licenses to bring undocumented sectors under tax net.
Pakistan had agreed to implement the International Monetary Fund (IMF) condition for mobilizing Rs.5.1 trillion revenues from domestic sources to get a bailout package of $6 billion. It is now difficult to achieve this ambitious target of generating revenues as tax collection has shown a short fall of Rs.210 billion in the first quarter of the current fiscal year. The lending agency has not approved the downward revision of tax collection quantum. The shortfall was offset by 50 percent from nontax revenue mobilization of Rs. 102 billion through licenses renewal of telecom companies.
Chairman FBR is optimistic about the success registration of big retailers under the sales tax regime for which point of sales tax automation systems shall be installed at 17000 big shopping malls. If it does materialize, then big retailers ‘real income can be assessed for the levy of income tax as well. FBR will be able to meet the tax collection target if the scheme of market committees gets functional for the registration of traders with tax department.