Do not yield to traders’ pressure


Editorial

The President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Mian Adrees and Senior Member Inland Revenue Policy, Shahid Hussain Asad, at a joint press conference announced that the government has offered incentives to those unregistered traders who voluntarily file tax returns.

These incentives include exemption from audit for three years if they agree to pay a certain minimum amount and declare their assets and income. Additionally, a tax amnesty scheme for non-filers on the same pattern as in the past is also reportedly under consideration. However, this agreement is clearly not acceptable to all traders and those opposed to it accuse the government of engaging in a divide-and-conquer policy.

Three different groups of traders gave strike calls on different days throughout the country. Those that are in favour of an agreement with the government on this issue held their strike on 1st August.

The other two who want this measure to be withdrawn by the government instead of any modification or agreement have called for strike action on 3rd and 5th August. Thus the unanimity displayed by traders in the past against any attempt to document their assets or income appears to have been effectively compromised raising the probability of the possible success of this measure in the current fiscal year.

The issue is the payment or in this instance resistance to the payment of 0.6 percent withholding tax on all bank transactions for non-filers. The government has reduced the tax to 0.3 percent till end September 2015 to allow non-filers to file their tax returns and become filers after which it will again be applicable at the rate of 0.6 percent.

It has been reported that privately many a trader negotiating with the government has acknowledged that their concern is their benami bank accounts which, if acknowledged by them, would considerably raise their tax liabilities in times to come. Finance Minister Ishaq Dar, in a meeting with Mian Adrees, emphasised that the tax on bank transactions is payable only by non-filers and rightly argued that it is the responsibility of all Pakistani citizens to fulfil their obligations to strengthen the national economy.

The traders apprehend that once they file their returns and the period of audit exemption is past the government would be able to tax them according to their real income/assets. Business Recorder has always supported efforts by the government to enhance documentation and thereby bring the large parallel illegal economy into the tax net.

It is sincerely hoped that this time around the government would not buckle under pressure and capitulate to the powerful traders who, in the past, have successfully demonstrated their street power by effectively shutting down markets throughout the length and breadth of the country whenever the prospect of documenting their income or assets was raised.

At the same time, it is necessary to accept that the Dar-led Finance Ministry, including the Federal Board of Revenue (FBR), is increasingly relying on indirect taxes to raise revenue. Increasing reliance on withholding taxes, defined as income tax, as a revenue source currently accounts for over 70 percent of all income tax collections, but these taxes are not collected by FBR but by withholding agents. These agents have to incur a cost in terms of time and money to provide this service to the FBR and many of whom have expressed an inability to collect on behalf of the government particularly, airlines and travel agents. Furthermore, more often than not this deduction of withholding tax is passed on as an element of cost to the consumer.

In such instances it therefore cannot strictly be defined as income tax. One would hope that the government turns its attention to increasing income tax collections from parliamentarians, the tax paid by them as well as all income taxpayers is now available on the FBR website, but there has been no appreciable increase in tax collections as a result of this publication.

The government must also acknowledge that small traders have neither the resources nor indeed the capacity to file complicated tax returns. And alternatives must be provided to those who legally are not liable to file returns for example those whose income is agro-based or indeed those overseas Pakistanis who maintain bank accounts in this country.

To conclude, while one can fully support the effort of the government to enhance documentation yet it is hoped that it also turns its attention to rendering the tax structure equitable, fair and non-anomalous and seeks to facilitate filing of returns by simplifying the tax return forms.

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