The Federal Board of Revenue (FBR) is aiming to expand its tax net by including millions of unregistered shopkeepers and retailers. Their initiative, the Tajir Dost Scheme, has encountered some hurdles, but recent developments offer a glimpse of potential solutions.
Registration Expansion and Concerns:
- The FBR initially limited registration to specific cities. However, they’ve now expanded it to 42 cities, Multan, Mardan, Sukkur, Sahiwal, Sargodha, DG Khan and Gujrat aiming to register 3.2 million shopkeepers.
- So far, nearly 46,000 have registered, but concerns remain.
FBR’s Proposed Tax Based on Property Value Faces Resistance:
- The FBR proposed basing tax on the indicative income derived from commercial property values.
- Shopkeepers rejected this plan, fearing it would be complex, impractical, and lead to disputes.
- The potential for increased prices of essential commodities due to additional tax burdens was also a concern.
Alternative Plan Offered by Tajir Dost Scheme Chief Coordinator:
- Muhammad Naeem Mir, the scheme’s chief coordinator, proposed an alternative approach:
- Issue a simplified Urdu income tax return form for Tier-II retailers (a specific category).
- Charge a fixed registration fee of Rs. 1,200.
- Implement a 1.5% turnover tax based on the declared annual income in the return form.
- Eliminate the facility of tax credit for newly registered shopkeepers.
Stalemate and Potential Next Steps:
- During a meeting with the FBR, some traders threatened strikes if the property-based tax plan persisted.
- Mir’s proposal was reportedly rejected by the FBR due to a deadline for issuing a notification.
- The FBR plans to issue draft SROs (Statutory Regulatory Orders) with indicative income tables based on property valuation by July 15th.
- Traders will have a chance to comment on these draft SROs.
Key Takeaways:
- The Tajir Dost Scheme aims to integrate a significant number of shopkeepers into the tax system.
- The proposed method of basing tax on property value met resistance due to concerns about complexity and fairness.
- An alternative plan focusing on registration, simplified returns, and a turnover tax has been presented.
- Open communication and collaboration between the FBR and trader representatives are crucial for finding a solution that benefits both parties.
