LAHORE: Only four new traders filed tax returns under the government’s fixed tax scheme by the statutory deadline, prompting the Federal Board of Revenue (FBR) to acknowledge that the response had fallen below expectations and warn of stronger enforcement against non-compliant retailers.
FBR Chairman Rashid Mahmood Langrial told the Senate Standing Committee on Finance that the response to the scheme remained disappointing, saying that the government’s attempt to bring traders into the system through a simplified regime had failed to generate the expected participation.
“Good faith has been defeated” by traders, Langrial said, rejecting technical glitches in the filing application as merely an excuse for not filing returns.
FBR Member Operations Zubair Bilal told the committee that 787 tax returns had so far been filed under the new scheme, of which only four were from new filers.
The government launched the 1% fixed tax scheme for retailers, offering exemption from audits and the installation of Point of Sales systems in return for payment of the fixed tax.
Minister of State for Finance Bilal Azhar Kayani said the government had consulted traders before introducing the scheme and remained hopeful that participation would increase once the FBR began pursuing non-compliant businesses.
“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,” Kayani told the committee.
He said 10,338 retailers had registered through the application within two months, including 2,337 new registrations, but only a small number had subsequently filed returns. The scheme covers traders with annual sales of up to Rs200 million.
The government is targeting between 500,000 and one million traders from an estimated 3.7 million currently outside the tax system.
Asked about the potential Rs50 billion revenue collection from traders during the current year, Langrial said collections could exceed Rs100 billion if the scheme succeeded, but payments would be negligible if it failed.
Penalties for non-compliance are expected to be introduced in stages, beginning with a Rs10,000 fine, followed by Rs25,000 at the second stage and Rs50,000 at the third.
FBR Member Strategic Transformation Dr Hamid Ateeq Sarwar said those who failed to file returns would be pursued by the tax authority.
The weak response to the traders’ scheme came as the government extended the deadline for filing all tax returns by 15 days. The FBR received 5.7 million returns by the September 30 statutory deadline against 19 million registered taxpayers.
Langrial said the number of filers was nevertheless 1.7 million higher than at the same point last year.
Meanwhile, the FBR met its first-quarter revenue collection target of Rs3.03 trillion.
The Senate committee, chaired by Senator Saleem Mandviwalla, decided to review implementation of the traders’ scheme again after one month. Langrial, however, cautioned that the situation could remain unchanged by then.
