FBR made another deal with the traders. The Express Tribune
The federal government has again agreed to give tax concessions to Pakistan’s big retailers in return for a commitment to document their businesses, indicating the officers’ weaknesses in implementing the law.
As per the deal, the government will reduce the tax rates on the first available opportunity through an amendment to the Income Tax Ordinance, either when a mini-budget is presented or no mini-budget is introduced, at the time of the next budget , Sources said.
The agreement was reached between Pakistan’s retail chain stores and the Federal Board of Revenue (FBR) this week, with representatives of traders and officials of the Express Tribune confirmed FBR.
FBR member operations Mohammad Ashfaq, who is the law enforcer, agreed to these concessions on behalf of the Board of Revenue.
This is the second time in the past seven months that FBR and large retail chain stores have become understandable. The first deal remains unfixed.
Sources said the FBR agreed to reduce the income tax rates in return for re-auditing and documenting retail sales.
FBR has entered into a deal with large retailers on Point of Sales (POS) installations – a real-time invoicing system for sales documentation by large retail stores across Pakistan.
As part of the deal, FBR has extended the deadline for online integration of Pakistan’s large retail chains to the end of November, which was to be implemented from December 2019 onwards.
The integration of retailers with the online system of the FBR has been termed as a major reform by the government of Prime Minister Imran Khan. But the reform so far remains on paper with very little progress on the ground.
The provision for compulsory integration of retailers was introduced in the Sales Tax Act 1990 through the Finance Act 2019, and appropriate rules were laid down.
Live integration took effect from November 1, 2019, but by the end of August, FBR had barely integrated retailers with a real-time invoice system for sales documentation.
The wholesale and retail sectors contribute around 19% to national production but its share in tax collection is just 3.7% of total collections.
The previous Pakistan Muslim League-Nawaz (PML-N) government tried to bring retailers including Tier-2 retailers under the tax net, but made no progress. This time, FBR is largely targeting Tier-1 retailers that do business in mega shopping malls and run store chains.
According to retailers, FBR has accepted the demand of large retail stores not to open books for the last six years.
It is not clear whether the FBR took the International Monetary Fund (IMF) into confidence before making the deal.
Earlier in March this year, the FBR accepted their demand to raise the minimum income tax from 1.5% to at least 0.7%. Similarly, the FBR also agreed to reduce the withholding tax from 4.5% to 1.5%.
However, due to opposition from the IMF, the package could not be legally covered in the budget.
Speaking to The Express Tribune, former Lahore Chamber of Commerce and Industry (LCCI) president Irfan Iqbal Sheikh said, “The FBR has accepted our seven demands and a formal agreement will be signed on Thursday.”
“After the MoU in March, the new FBR team backed out of commitments, but we have now re-energized the process with the help of Industry Minister Hammad Azhar,” Sheikh said.
According to FBR officials, FBR did not accept the demand to relax the condition of cash expenditure beyond the current limit of Rs.250. He said the demand was against the spirit of documentation of the economy.
Sheikh said, “FBR has agreed that it will not conduct income tax audit for the last five years and sales tax audit of the last six years.”, FBR has agreed to extend the deadline for adding POS. 30 November. “
In return for these concessions, large retail chains will ensure compliance and install POS systems.
“There is also a realization in the FBR that things cannot proceed without implementing these things, whether the IMF agrees or not,” Sheikh said.
He said there were also problems with the POS model of FBR designed to meet the needs of the textile sector outlets. His idea was that some changes would have to be made to integrate departmental stores.
He extended the deadline for electronically integrating Tier-I retailers with FBR’s online system several times, which ended without success in August. According to FBR officials, as against 7,834 POS, less than 600 or about 7.3% can be registered.
Of these 600 taxpayers who opted to register with the FBR, the retailers that were configured with the data system of the FBR were no more than 500 of the large retailers doing business in Pakistan.
Published in The Express Tribune, 18 OctoberTh, 2020.