Sales Tax Committee meets: Standoff with traders persists FBR refuses to budge

Tax body opposes any move away from status quo; government in a spin

ISLAMABAD:

The withholding tax on banking transactions of non-filers and the subsequent opposition from the traders’ community has captured the attention of the government, stirring a riot of sorts. 

The government’s efforts to address genuine concerns of traders are being met with resistance, as vested interests in the country’s tax machinery have opposed any out-of-the-box solution, endangering the plan to resolve the crisis by the mid of this month.

The political leadership and taxmen were poles apart during the first meeting of the Sales Tax Committee, held early this week, said officials who attended these discussions The committee is constituted to address concerns of the traders. PML-N MNA, Rana Afzal Khan, who is also Parliamentary Secretary of Ministry of Finance, heads the committee.

The committee has a mandate to review the third schedule of the Sales Tax Act that deals with minimum retail price and will also propose sector-specific minimum turnover tax for retailers. Finance Minister Ishaq Dar has directed that the committee should finish its work by August 13.

Identifying the problem

The government is charging 0.3% tax on all banking transactions aimed at pushing non-filers to come into the tax net. This rate would double come October 1 if tax returns are not filed.

Traders, who also enjoy backing of the ruling party, have refused to come in the tax net until issues about minimum turnover tax and their profit margins are decided.

At present, over 80% retailers are non-filers. They fear harassment in the hands of the FBR once they fully declare their sales and assets.

Finance Minister Ishaq Dar shares the concerns of the traders and is even ready to give some concessions.  Even though the traders have boycotted these meetings, they sent proposals through PML-N MNA Mian Abdul Manan to the committee.

The traders have identified 12 sectors where they want the government to lower the standard 1% turnover tax rate, as according to them the profit margins in these sectors were very low.

However, according to sources, FBR officials who represented the tax machinery refused to endorse any plan that breaks the status quo. The status quo is in favour of corrupt elements who are beneficiaries of the present low-tax bases, according to tax experts.

List of complaints

Another reason for the opposition is lack of comprehension of complex income and sales tax laws by some of the members of the FBR, said the sources.

They added that due to capacity constraints the taxmen were unable to realise the genuine problems of the traders.

One of the obstacles was the treatment of retailers and wholesalers who deal in sugar trade. The FBR representative refused to give any concession, sources said. Similarly, the taxmen also opposed the proposal to withdraw 2% further sales tax from those who are already paying sales tax through their electricity bills.

The government charges 2% additional sales tax, known as further tax, from those sellers who sell their goods to non-registered persons. This levy is charged in addition to standard 17% sales tax, since the majority of businesses are unregistered, the FBR has started using this 2% tax as a revenue tool .

The FBR’s representative, Ashraf Khan, who is also a Member Operations, was not available for comments.

Published in The Express Tribune, August 6^th, 2015.

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