Dar extends deadline for tax amnesty scheme

Only 2,200 traders availed it, against officials’ estimate of one million

ISLAMABAD:

Against the target of one million, about 2,200 traders availed tax amnesty scheme and contributed nearly Rs220 million to the kitty to date, forcing the government to grant two-week extension in the hope of achieving a respectable figure to avoid further embarrassment.

Finance Minister Ishaq Dar on Monday announced to extend the duration of ‘Voluntary Tax Compliance Scheme’ to 15th of March in the presence of traders who let his government down and could not fulfil their tall claim of bringing in a million non-filer traders in the tax net.

Dar also announced to increase the rate of withholding tax on banking transactions valuing over Rs50,000 from 0.3% to 0.4% to compel the traders to come in the tax net.

The standard withholding tax rate enforced from July was 0.6% that the government halved to appease the traders. During first seven months of the fiscal year, the government collected Rs13.2 billion by charging 0.3% on bank transactions from those who did not come in the tax net.

Violation

The government’s decision to extend the last date for filing income tax returns for the current fiscal year for traders and all other segments has resulted in a violation of Income Tax Rules. Under Rule 81-B, the Federal Board of Revenue has to publish new Active Taxpayers List (ATL) of the current fiscal year by March 1st.

The ATL that is available on the FBR website pertains to the last fiscal year 2014-15. While extending the scheme for traders, the government also extended the last date for filing income tax returns for individuals and companies by another 15 days.

The government has not yet closed the process of accepting income tax returns for the current fiscal year against the original deadline of September 2015. This would create problems for the financial sector that uses ATL for various purposes, said a legal expert.

Saving face

Unlike in the past, Dar has refused to give an estimate as to how many of the traders would opt for the scheme in the next 15 days. “I cannot give a number but the representatives of the traders say this time it will be a decent figure,” said Finance Minister while responding to a question.



Dar said by the last date, less than 2,500 people availed the scheme and paid Rs220 million in taxes. FBR Chairman Nisar Mohammad said that the majority of about 2,200 people were those who filed the income tax returns for the first time.

History

Protected by an Act of parliament, Prime Minister Nawaz Sharif had offered the ninth amnesty scheme, second of his government, to both non-filers of the income tax returns and to those who were already in the net but hid their actual incomes.

All Pakistan Anjuman Tajaraan, a splinter group of traders, had claimed that the scheme would help bring one million traders in the net out of 2.8 million traders who remain outside the net. On traders’ demand, the government set the amnesty scheme rate at 1% and offered them four-year amnesty from the audit. Yet, the scheme badly failed as it lacked a stick. The government’s strategy of not involving Punjab government-backed Khalid Pervez group of traders into negotiations also backfired.

Despite dismal results of the amnesty scheme, the government is continuing its traders’ friendly policy. “The government would maintain friendly relationship with traders and gradually increase the rate of withholding tax,” said Dar while responding to a question about his future course of action.

Dar also avoided a question on whether he would review his strategy and involve Khalid Pervez Group in talks. The government had invited all the representative bodies and negotiated with those who came forward, said Dar.

Revenue collection 

The FBR collected Rs1,814 billion during first eight months (July-February) of this fiscal year, leaving Rs291 billion balance that it will have to collect in March to meet IMF’s condition for the third quarter of the fiscal year. The IMF has set indicative revenue collection target for July-March period at Rs2,105 billion.

For the current fiscal year, the IMF has given Rs3,104 billion revenue collection target to the FBR.

Published in The Express Tribune, March 1^st, 2016.

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