Flat tax rate for retailers for three years proposed

ISLAMABAD: In a bid to bring million of retailers in urban and rural areas into tax net both, the Tax Reform Commission (TRC) has asked the government to impose a flat tax rate on retailers having annual turnover of up to Rs5 million in the budget 2015-16.
The commission has also asked the government to charge flat tax even from those retailers who are operating in rural areas of Pakistan. The government have failed to bring retailers into tax net despite offering various scheme during last 25 to 30 years and it is yet to be seen whether this political has the political will to impose such tax.
The commission has proposed pay flat income tax rate for retailers for three years and get black money whitened equivalent to 30 times of the tax paid during three-year period. The scheme is proposed only for those retailers who have annual turnover of up to Rs5 million. For the medium-sized and big retailers the commission has proposed normal income tax rates.
It has also recommended that the Federal Board of Revenue should charge tax in the range of Rs2,500 to Rs20,000 from retailers doing business in the rural areas. The rate will be worked out on the basis of size of the shop.
For urban areas, it has proposed three income brackets, starting from Rs5,000 to Rs25,000 for low income traders; Rs10,000 to Rs35,000 for medium income retailers and Rs15,000 to Rs50,000 for high income category of small retailers. The taxpayer under this schedule will be given a distinctive tax certificate to be displayed distinctively at their business.
The commission has suggested inserting a new schedule, the Ninth Schedule, in the Income Tax Ordinance of 2001 to give legal cover to the proposal. TRC has proposed that the taxpayer falling under this schedule will be required to file the return of total income along with the tax payment on the due date, which will be conclusive evidence in respect of income under this schedule.
The incentive is that if the retailer pays his due tax for a period of three consecutive years, he will be granted amnesty with regard to his undisclosed wealth up to an amount equal to thirty times of the tax he paid during such periods.
The suggestion has come at a time when the government has failed to bring millions of these retailers in the tax net despite announcing special sales tax registration scheme. Under pressure from retailers, the government has already withdrawn the condition of ability to accept debit and credit cards. The two-tier scheme wasimplemented through Statutory Regulatory Order 608. However, the results of SRO 608 are appalling, as FBR could not implement it due to the influence of retailers lobbies.FBR has yet another special treatment for the retailers - pay taxes at the value of 0.75% of annual turnover. This is applicable for those having annual sales over Rs5 million.