Fixed tax rate for retailers under study

ISLAMABAD: The government is mulling over different proposals to bring millions of retailers into the tax net by offering them a fixed and final tax rate scheme in the upcoming budget 2022-23.

“Yes, we are proposing a fixed and final rate of scheme for retailers to bring them into the tax net. We need the final nod of the political leadership but it requires approval of the IMF as well,” sources told The News here Tuesday.

The Point of Sale (POS) machines would also be promoted but so far the FBR had failed to make desired progress on this front. For integration with the POS, the FBR had introduced incentivised tax rate for those outlets who would integrate with this machine to gauge real sale of branded outlets.

It is not yet known what kind of a fixed rate scheme the government is going to introduce in the coming budget but all such schemes had failed in the past to lure small businesses to bring into the tax net.

When contacted, former FBR member Shahid Hussain Asad said that there was a need to promote documentation of the economy and it could be done through placement of a digital payment system. He said that the digital payment should have incentives for buyers and shopkeepers then such a scheme would be able to get the desired results.

Meanwhile, Pakistan and IMF are negotiating for finalising salient features of the upcoming budget 2022-23. The IMF asks Pakistan to bring down the budget deficit from 7.4 percent of GDP, equivalent to Rs5,000 billion in the outgoing fiscal year to 4.9 percent of GDP for the upcoming budget 2022-23.

The IMF asks for fiscal adjustments of 2.5 percent of GDP in the coming financial year. Now the government has conveyed its wish list to the IMF that they could undertake fiscal adjustment of maximum two percent of GDP, so it is seeking agreement with the IMF to bring down the budget deficit from 7.4 of GDP to 5.4 percent of GDP for the next fiscal year.

In the wake of fiscal adjustments of 5.4 percent of GDP, the government wantsto jack up the FBR’s annual tax collection target up to Rs7.255 trillion in the next budget. Now the government is mulling over different proposals to raise tax rates for non-filers, impose super tax on abnormal income/profits, luxury tax on real estate and big houses, jack up tax rates on tobacco and beverages as well as come up fixed scheme for retailers. There is a proposal under consideration to increase cost of doing business for those who preferred to remain out of the tax net.

The tax rate for non-filers will be re-introduced in the coming budget. The FBR is also considering increasing tax on tobacco and also jacking up advance tax on tobacco at leaf threshing stage. The tobacco industry has asked the government to increase advance withholding tax from Rs10 per kg to Rs300 per kg for the coming budget. The super tax and luxury tax are also under consideration with the concept to impose such taxes on those who are drawing abnormal income/profit and remained unproductive sectors.