FBR seeks to lure retailers

After failing to rope in traders despite giving multiple tax amnesty schemes in the past five years, the Federal Board of Revenue (FBR) has now decided to lure traders by offering them a simple one-page income tax return form.

The tax machinery's sheer failure to expand the tax net can be gauged from the fact that as of June 2018 there were less than 84,000 wholesale dealers and retailers in 14 major cities who filed income tax returns, showed the federal cabinet documents that the FBR submitted last week.

In these 14 cities, the FBR has massive human resources presence.

What should be a matter of grave concern to Prime Minister Imran Khan was that the number of wholesale dealers and retailers who filed annual income tax returns for the fiscal year 2017-18 was less in Karachi than in Lahore.

The Pakistan Muslim League-Nawaz (PML-N) government had given two tax amnesty schemes to the traders in the hope of bringing two million retailers in the tax net. The PTI government also twice succumbed to the pressure, first in October last year when it withdrew the compulsory CNIC production condition on purchases of Rs50,000 and then in March this year.

The FBR has introduced a simplified tax return form for small retailers having annual turnover up to Rs10 million, said Syed Nadeem Rizvi, spokesman for the FBR, while addressing a press conference.

Three FBR members, Rizvi, Member Inland Revenue Policy Chaudhry Tarique, and Member Information Technology Asim Ahmed addressed the press conference to announce the new income tax return form for the tax year 2020.

It should have been a matter of concern to the government as the form was made available 70 days after the start of the current fiscal year.

The delay in finalising the income tax return form would lead to an extension in the last date for filing income tax returns, which is September 30.

"With retailers' turnover up to Rs10 million, around 200,000 retailers will get the benefits of the simplified tax return form," said Rizvi. The FBR has targeted to facilitate small traders having a monthly turnover of around Rs833,000.

Numbers tell a sorry tale

The FBR submitted the analysis of tax year 2018 with the federal cabinet for securing its approval to publish the tax directory for fiscal year 2017-18.

The numbers showed that the wholesale and retail sector had a 19% share in the total size of the economy but its share indirect taxes was only Rs54.5 billion or 3.8%.

Worryingly, there were less than 84,000 retailers and wholesalers who filed annual income tax returns for the fiscal year 2017-18 in 14 major cities, according to the FBR's documents for the federal cabinet.

The maximum number of returns was filed by Lahore-based retailers. There were nearly 23,000 returns filed by Lahore city retailers, followed by 18,500 retailers from Karachi.

From Multan city, about 8,900 retailers filed returns, followed by 7,200 from Faisalabad, about 6,000 from Peshawar, 3,700 from Rawalpindi, about 3,150 from Bahawalpur, 2,800 from Sukkur, 2,100 from Sialkot and Quetta each, 1,900 from Sargodha, 1,800 from Hyderabad, 1,500 from Islamabad and 1,300 from Gujranwala.

In March this year, the FBR struck a deal with traders - second in five months - and agreed to relax the audit condition and reduce the latter's income tax rates in return for documenting their sales.

Earlier, in October last year, the PTI government caved into the demands of the small and medium-sized traders without achieving the objective of broadening the tax base and documenting the economy.

FBR's Member IR Policy Tarique said the agreement signed with small traders did not bar the tax machinery from getting wealth statements through income tax returns.

The FBR's income tax base shrank 12% in the tax year 2019 as only 2.5 million taxpayers submitted annual returns against 6.2 million National Tax Number (NTN) holders.

The FBR is targeting to increase income tax returns by 20% to 25% against around 2.6 million last year, Rizvi said, but added that there was no target but efforts would be made to maximise the number of return filers.

This means the FBR is targeting to increase the total number of return filers to 3.2 million, still half of the people and companies that are registered with the FBR and have NTNs.

The FBR's member IT said efforts were made to upgrade the PRAL system and there was hope that the online filing of tax returns would not be choked this year.

The FBR members said the tax machinery would not share third-party information with the National Database and Registration Authority (NADRA) as data-sharing was barred under the income tax law.

The FBR could not share third-party data with NADRA for analytical or any other purposes as the income tax law did not permit the sharing of taxpayers' information with anyone, FBR's Member Information Technology Asim Ahmed said.