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FBR-Traders Negotiations Fail, Mini-Budget Likely To Be Presented In Oct

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Islamabad:

Talks between Federal Board of Revenue and Traders’ organisations over the system of fixed tax and traders’ tax could not be successful because both sides refused to budge from their positions.

Although no official statement was issued on the failure of talks, well-placed sources at the FBR told Naya Daur that it is one of the prerequisites of International Monetary Fund (IMF) program that traders and retailers must be brought into the tax net. The step is needed if the government wants to broaden tax base and meet the tax target set mutually by the government of Pakistan and IMF.

FBR also refused to withdraw its condition that all traders whether wholesalers or retailers must be documented and collect identity card copies from buyers who purchase articles worth more than Rs. 50 thousand.

But traders, on the other hand, say that FBR should not treat them like manufacturers who add expenses and taxes to its manufacturing cost and can afford to hire big accountancy firms to file tax returns and in most cases dodge the tax authorities.

“Majority of traders are either illiterate or not well-educated and cannot afford expert lawyers and tax consultants which is why they are reluctant to document their businesses”, a trader who was part of the negotiations with FBR told Naya Daur on the condition of anonymity.

He added that during the last three months, the business volume has gone down by around 38% and will further decline if this situation of uncertainty continues.

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A senior FBR official requested not to be named told Naya Daur that if FBR failed to broaden its tax base and brought more sectors into tax net in first quarter of the current fiscal year, the government will be left with no other option but to present a mini budget in coming October.

Sales tax will have to be raised from 17% to 20% to meet the tax target if we want to receive second installment from IMF, he added.

When asked if raising sales tax will lead to further hike in prices for the poor, the FBR official replied, “Certainly. If we cannot collect direct taxes, we have to go for indirect taxes and sales tax is the easiest possible way to collect more taxes.”

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