ISLAMABAD: The government has old wine to offer in a new bottle to appease both the IMF and the traders in its bid to broaden the tax base. The strategy, however, offers no promise to arrest the flow of smuggled goods, one of the key reasons for the undocumented economy.
The tax amnesty scheme for whitening black money of traders
By ONLINE
November 24, 2015
ISLAMABAD: The government has old wine to offer in a new bottle to appease both the IMF and the traders in its bid to broaden the tax base. The strategy, however, offers no promise to arrest the flow of smuggled goods, one of the key reasons for the undocumented economy.
The tax amnesty scheme for whitening black money of traders will be treated as “regularisation of money” as the IMF is opposed to any kind of amnesty. The government sees no other option to bring traders in the tax net, according to a well-placed official. Compared to past amnesty schemes, this measure will be for traders only.
Although the government has taken a bold decision of daring traders community, the constituency of the ruling party, the current scheme lacks any strategy for checking the smuggled items that are available at cheap rates but without any invoicing, generating a chain of undocumented income and tax evasion at multiple level.
“It is hard to fix all issues at once but we are trying to raise the cost of undocumented business through taxing banking transactions,” said an official privy to the ongoing deliberations when asked about the challenges to economy from the smuggled goods.
Instead, the government is more focused on bringing the traders into the tax net by exempting them from tax audit at least for three-year allowing them declare their hidden assets and bank accounts, and in return they will gradually increase their tax payments during the amnesty period.
“We have reminded traders that the era of benami transactions is going to be over soon,” said a tax official with reference to the legislation being drafted for tabling in Parliament early next year suggesting heavy penalty for offenders.
The government will grant amnesty to the traders having undeclared assets if the declarations are made in the tax return and such return filers continue increasing their tax payment by 25% during the financial years exempted from scrutiny.
Unlike the complicated tax return form for the regular taxpayers, one-page tax return is being designed for the traders in English and Urdu both benefiting from this scheme in order to facilitate their entry into the tax net.
Another issue regarding the sales tax on the turnover is also being reduced from one percent to 0.25% in order to settle down long-standing dispute between the FBR and the traders. The traders have been objecting turnover on the total cost of product instead of total sale.
Among other measures to address their concerns, regional-level committees of traders have been formed for meetings with the regional tax commissioners to discuss ways and means for ironing out differences.
Right now, the government is in contact with two groups of traders headed by Khalid Pervez and Naeem Mir, both are Lahore-based.
The former is said to be non-cooperative as he tends to politicise the entire issues even the tax notices that he received months ago alleging him of mis-declaration of bank accounts and assets.
In tax year 2013, he declared a book shop in Urdu Bazara as his only business in addition to foreign remittances of four millions rupees and property income of three millions and paid tax Rs49,992, according to an FBR official. This was in contrast with the six undeclared bank accounts and plots as well as eight vehicles spotted by the FBR forming basis of issuing him a notice.
Naeem Mir, on the other hand, has been cooperative and urging the government to launch an awareness campaign in order to counter the false propaganda, address their legitimate concerns in addition to educating traders about the benefits of being in the tax net.
