The Federal Board of Revenue (FBR) is evaluating a new scheme aimed at bringing 3.6 million retailers into the tax net, following the underwhelming performance of the Tajir Dost Scheme, which registered only 44,830 retailers.
Historical Context:
Efforts to tax retailers have consistently failed over the past three decades, including various attempts since the 1990s. Previous initiatives, such as the Point of Sale (POS) machines and tax collection through electricity bills, have also met with limited success.
New Scheme Proposal:
- Simplified Fixed Tax Scheme: The FBR plans to introduce a fixed tax scheme based on the valuation of shops.
- Valuation Process: Property valuations are currently underway in major cities and towns, with notifications expected this month.
- Scheme Features: The scheme will feature different tax slabs based on shop valuations to incentivize registration.
Official Statement:
“We are contemplating different options to bring 3.6 million retailers into the tax net. This time, the FBR plans to implement different slabs based on shop valuations. A fixed tax might be introduced to attract retailers into the tax net,” stated a senior FBR official.
Current Registration Efforts:
- Tajir Dost Scheme: Launched on a volunteer basis in six cities with a deadline of April 30, 2024. Despite efforts, only 78 retailers initially registered.
- Continued Efforts: With trader leader Naeem Mir’s involvement, the scheme eventually registered 44,830 retailers out of over 3 million nationwide.
Challenges and Previous Failures:
- Shutter Power: Retailers’ ability to influence policymakers has often thwarted stringent tax collection measures.
- Technological and Operational Hurdles: Issues with technology and operational frameworks have hampered the success of IT-based solutions like POS, Track & Trace, and Digital Invoicing.
Vision and Implementation:
FBR officials argue the lack of a cohesive vision and an effective registration mechanism for retail shops has been a significant barrier. The FBR aims to launch the new scheme next week, with an initial plan to charge a modest Rs12,000 annually from retailers.
Government’s Commitment:
The government has assured the International Monetary Fund (IMF) of its dedication to broadening the tax base and enhancing revenue administration. The new policy reforms are set to take effect from July 1, 2024, focusing on enforcing income tax returns and collecting due minimum advance income tax.
Conclusion:
The new fixed tax scheme, expected to launch soon, aims to simplify and streamline the tax registration process for retailers, marking a significant step towards enhancing Pakistan’s tax base and ensuring sustainable economic adjustments.
