Protesting traders, leaders are out of tax net

ISLAMABAD: The protesting trade leaders and their followers are virtually out of tax net. Very few of them are registered for the sales tax, nevertheless, majority of these registered traders don’t pay sales tax, let alone filing the income tax returns, The News investigation has revealed and traders have confirmed.
A prominent union leader who held first strike admitted that tax evasion is a crime against the state and that the traders have a plenty of black money as well as benami bank accounts. While he agreed that their demand is not justified, he said they were staging strikes to “save our leadership” as a group of traders was exploiting the whole community that needs to be educated about taxation and their legitimated concerns addressed by the government.
As withholding tax on bank transactions for non-filers has sparked uproar from traders, this outrage has brought under spotlight the undocumented economy revealing their tax malpractices and the challenges for tax administration.
Atiq Mir, the Chairman of All Karachi Tajir Ittehad, who claimed a successful shutter down in the port city, neither files tax return nor pays sales tax. He first insisted as a regular return filer, but later conceded he doesn’t when confronted by The News. “I have not filed tax return for last four-year,” Atiq admitted. His furniture business doesn’t pay sales tax either, Atiq acknowledged, saying 90% traders don’t do this.
Then come the union leaders who had staged strike on August 1 this year. Ajmal Baloch, the President All Pakistan Anjuman-i-Tajiran, claims having filed tax return but The News couldn’t find his name in the tax directory.
Ajmal said he had filed tax return manually, not electronically, and that could be the reason of exclusion from the directory. His claim is in contrast with the FBR assertion in the past that all those who did filing, no matter manually or electronically, were named in the directory.
Naeem Mir, the Secretary General All Pakistan Anjuman-i-Tajiran, filed the tax return and his name is in the directory. Any guess about his income tax payment? Rs19,343. He grudgingly admitted the figure by arguing that he also pays the advance tax. When told that advance payment is also registered and reflected in the tax return, he didn’t have any plausible answer.
Naeem however declared tax evasion as a ‘crime against state’ and that ‘we will have to educate traders’ about paying tax honestly. He didn’t hesitate to admit that his life style doesn’t match with his tax payment.
Although he didn’t have exact estimate of the numbers of traders in Pakistan, he speculated that they must be in lacs. “We are in lacs. There are 40 lac commercial meters,” he said giving a rough idea. Ajmal, his union’s president, went a step further estimating 60 lac commercial meters. Naeem acknowledged that majority of the members of the traders’ union are not in tax net.
Their estimated figures of the commercial meters are in contrast with the number of all business entities registered with the FBR for the sales tax that is afforded by the end consumer as this tax is inclusive in the price of a commodity purchased. Nevertheless, this tax is not deposited to the government.
There are only 35,483 business entities and their contribution under the head of sales tax is Rs16.29 billion in the last fiscal year 2014-15.
Again, all of them are not traders. Included among these registered agents are also multi-national companies, petroleum companies, cellular companies which don’t fall in the category of wholesalers and retailers, reveals the official figures examined by The News.
An analysis of the data found only 2,220 business entities whose annual sales tax payment was equivalent or above Rs500,000 in the fiscal year 2014-15. Their contribution formed 93.80% (Rs15.28 billion) of the revenue collection through sales tax.
Of the remaining 33,263 registered entities, there were 23,265 (65%) who had not paid any penny under this head. And the sales tax amount of the rest 12,218 (35%) is below Rs500,000 going down to the level of even one rupee only.
Naeem understands the gravity of the situation and considers it a criminal act but stresses on the government to help them come out of this awkward situation. “We want to be in the tax net. We don’t want to engage in benami transactions. We have plenty of black money. Our money is in benami accounts.”
He blames the smugglers, importers and local manufactures for forcing them into mis-declaration of their sales, profit and transactions through benami accounts. We get no invoice from those who sell smuggled items, he explained. The importers do under-invoicing and the local manufacturers don’t give invoice at all, Naeem said calling on the government to take action against them. “The biggest thieves are the importers and local manufacturers.”
He said he had been continuously floating suggestions to the government for fixing this mess. Why the FBR picks for audits only from those who file tax returns, Naeem asks. This means punishing those filing the tax returns. The government should also go against the non-filers by tracking them their banking transaction and hold them to account.
Asked why he champions the rights of the traders on this issue knowing well that they are not justified in opposing the withholding tax for the non-filers, Naeem replied: “We have to save our leadership. There is a group of traders who are exploiting the ignorance of the community.”
He hailed the government’s belated move to launch an awareness campaign explaining that only non-filers will be paying 0.3 withholding tax as there was a widespread assumption that this deduction will apply on all of them.