Fixed tax draws only 2 new traders

Rs26m can be collected from traders so far vs annual target of Rs50b A total of 6,631 traders have so far prepared draft returns under the new scheme but about 6,587 were already the return filers Only two new traders have so far opted for the 1% fixed tax scheme while another 315 shopkeepers who have filed returns are already part of the tax regime – an outcome that suggests that the government's scheme may fail. With only a week left in the deadline to file returns, a mere Rs26 million, with an average of Rs81,944 per trader, could be generated so far against the annual target of collecting Rs50 billion from traders under the new scheme. Minister of State for Finance Bilal Azhar Kayani on Tuesday reviewed the status of the fixed tax scheme. According to details, so far two new shopkeepers have availed of the scheme, one from Quetta and another from Rawalpindi. A further 44 new shopkeepers had drafted their returns but did not submit them till Tuesday. Total beneficiaries of the new scheme have remained a mere 317 traders, of which 315 were already income tax filers. The government had launched the scheme under which small retailers could pay a fixed 1% tax on sales in return for exemption from tax audits and the requirements related to digital transaction systems. It is the second such initiative by the government aimed at bringing traders into the tax net after the earlier "Tajir Dost" scheme failed to deliver the desired results. Kayani was hopeful about the success of the scheme due to the involvement of representatives of traders in its design and execution. Although the state minister never officially gave any target of traders to be brought in the tax net in the first year, he did hope that a majority of 3.5 million traders would opt for the scheme. A statement issued by the finance ministry on Tuesday said that the meeting decided to intensify the awareness campaign for shopkeepers. Kayani directed tax commissioners across the country to coordinate with local tax bars so that shopkeepers could get forms filled from lawyers of their choice. Progress on the Easy Tax Scheme was reviewed in the meeting. As per the points agreed with trader representatives, the Federal Board of Revenue (FBR) has the authority to impose a penalty on shopkeepers who neither file tax returns under the new scheme nor opt to submit returns under the regular income option. "Under the tax scheme, the shopkeeper who does not use either option will face a penalty of Rs10,000 in the first month, Rs25,000 in the second month and Rs50,000 in the third month," said the official statement. Shopkeepers would either pay the fixed tax on the basis of turnover or file regular returns, it added. The state minister stressed that information about the scheme should reach every shopkeeper with the help of trader representatives. By acting on the demands of traders, the government has fulfilled its promise; now shopkeepers must make the scheme a success, he said. However, the new scheme could not encourage many unregistered traders. Details showed that there were another 44 new traders who had prepared the draft of income tax return but did not file it. The statutory deadline for filing tax returns by the traders and all taxpayers is September 30, which is expected to be extended due to poor results. A total of 6,631 traders have so far prepared draft returns under the new scheme but about 6,587 were already the return filers, who may accept the new scheme because of exemption from audit and the installation of digital mode of payments. Out of the total 317 filers so far, the maximum number of 87 shopkeepers were from Rawalpindi, including one new trader. There were hardly 61 filers from Lahore but none of them were new filers. From Karachi, a mere 24 traders have so far opted for the new scheme but none of them is a new filer. From Sahiwal, 33 traders have so far come under the scheme; all of them already part of the tax regime. From Sialkot, just 25 shopkeepers embraced the new scheme and from Islamabad, there were only 23. Last week, Bilal Azhar Kayani affixed a green plate on the outlet of a shopkeeper registered under the new scheme. FBR staff cannot enter the premises of a shopkeeper who joins the scheme and generally no audit of such a shopkeeper will be conducted. But even this benefit could not encourage the traders. The new scheme also exempts participants from installing the Point-of-Sale system and from acting as withholding tax agents. Shopkeepers owning a single outlet with annual sales below Rs200 million over the past three consecutive years can join the scheme. Eligible participants will pay a 1% tax on the total value of goods sold. Where the government goes soft on traders and real estate agents, it has not done enough for the marginalised salaried class. Income tax collection from the salaried class amounted to Rs91 billion during July and August of the current fiscal year. It was higher by Rs6.3 billion, or 7.5%, compared to the same period of last year. FBR data showed that income tax collection from the real estate sector decreased by 28% to Rs28 billion in the current fiscal year. In just two months, the real estate sector paid Rs11.2 billion less than last year despite an expected increase in property transactions.