FBR says medium traders needn’t to withhold taxes

ISLAMABAD: A new tax law has absolved medium-sized traders from the responsibility of withholding taxes while rationalising taxation structure on businesses opting to come into the tax net, the Federal Board of Revenue (FBR) said on Saturday.

The FBR said the tax amendment ordinance made corrections in the law to accommodate reasonable demands of traders.

“Since CNIC (computerised national identity card) disclosure of every sale is a major requirement of law now, the traders were rightfully demanding a decrease in minimum tax rate as majority of taxpayers were earlier paying the minimum tax on grossly suppressed sales,” the revenue body said in a statement. “In view to encourage correct declarations, the rate of minimum tax has been rationalised.”

The FBR further said medium-sized traders have been absolved from their liability as withholding agent to increase ease of doing business.

The president, last week, promulgated Tax Laws (Second amendments) Ordinance 2019 to remove anomalies in the taxation structure.

The apex tax authority has been taking multiple measures to expand tax net that currently covers less than three million taxpayers. One such measure is to bound sellers to take CNIC of the buyer making a purchase exceeding Rs50,000, a move that was widely opposed.

The government encourages business community, mainly big retailers, to install point-of-sales system to get connected with the FBR on real-time basis in return of tax concessions.

FBR Chairman Shabbar Zaidi said integration of tier-1 retailers with automated point-of-sales system is a win-win situation both for such retailers and the FBR.

“FBR assures a smooth, harassment and hassle-free transition,” Zaidi said in a tweet last week. “It will be ensured that a transparent system with least human intervention put on place.”

The FBR said trade associations have committed to get all medium- and large- sized retailers registered with the income tax. The associations have also nominated their representatives to evaluate turnover of under-declaring business and have also joined hands with the FBR for dispute resolution in audits.

“FBR considers that the future of taxation lies in collaboration with taxpayers as opposed to confrontation,” the revenue body said. “It is likely that this arrangement will achieve a win-win situation for traders and FBR in achieving goals of documentation and reasonable taxation without creating fear and distorted economic behaviour.”

Meanwhile, the FBR said its tax collection, in the first six months of the current fiscal year of 2019/20, amounted to Rs2.083 trillion, 16.3 percent higher than in the corresponding period a year earlier.

“It is the highest growth rate since 2015/16 and FBR has made great efforts to attain this growth despite rather subdued economic activity,” the revenue body said in a separate statement.

The original revenue collection target of Rs2.367 trillion was revised down to Rs2.197 trillion in view of import compression in the first quarter. The trend has continued for the second quarter.

“This compression of over 5 billion dollars has on one hand improved current account situation but on the other hand has adversely affected the usual revenue resources of the government,” the FRB said.

“An estimated loss of Rs56 billion of taxes is incurred on every billion dollar of import compression.”

The FBR said it has redoubled its efforts on domestic side and has managed to shift its tax dependence on import taxes from 56 percent to a little above 40 percent this year.

“With expected upturn of economic activity in the last six months and a likely stabilisation of imports, it is expected that FBR is going to collect an unprecedented amount of taxes this year without disrupting and distorting economic activity,” it added.