The government on Wednesday issued a simple bilingual income tax return form for traders and exempted them from giving details of assets and bank accounts, as it began consultations for giving them more concessions after the traders staged a countrywide strike.
The Federal Board of Revenue (FBR) released a draft three-page income tax return form for tax year 2024 and onwards for those traders who were non-filers in the previous year. The form will take finality after seven days.
The return form still carries 34 questions but these are generic in nature and do not require specific details about assets owned by the traders – the influential group that has sympathisers in the ruling party.
There is no requirement for the traders to disclose their bank accounts, except for a bank account for receiving tax refunds, if any. Traders across major cities observed a shutter-down strike on Wednesday against the government's new scheme. The scheme was already benign but the traders wanted its complete abolition.
The strike call had been given by the Central Organisation of Traders and the All Pakistan Anjuman-e-Tajiran, backed by two mainstream religious political parties.
The coalition government has enforced the scheme for all dealers, distributors, retailers, manufacturers-cum-retailers, importers-cum-retailers or any person involved in the supply chain of goods and doing business in 42 cities.
It has imposed a fixed tax of Rs100 to Rs60,000 per month and a majority of the traders fall in the low category. However, certain exclusions, mainly related to 100-square-foot shops and the fixed rate of Rs100 on 50-square-foot shops in commercial areas, will make it challenging for the FBR to meet tax targets.
Out of the 42 cities, 25 are in Punjab, seven in Sindh, six in Khyber-Pakhtunkhwa, three in Balochistan and one is the capital city Islamabad. Previous attempts to bring traders to the tax net have remained unsuccessful, including the compulsory door-to-door registration during Pervez Musharraf's tenure.
The government has imposed a nominal tax of Rs100 per month on shops up to 50 square feet in commercial areas, makeshift shops, kiosks or small shops measuring no more than 5x3 square feet, instead of charging a normal progressive income tax. This amount is seen as insignificant. Traders paid a paltry sum of Rs17.5 billion in income tax compared to Rs368 billion paid by the salaried class in the last fiscal year. Under the new scheme, the government has envisaged collection of Rs50 billion in this fiscal year, which now seems impossible.
Sources said that after a largely successful countrywide strike, the FBR on Wednesday began discussions for giving some relief to the traders. They said that among the proposals were reducing the fixed income tax rates and collecting tax in quarterly installments instead of monthly installments. There is also a proposal that the authority to reduce tax rates should be delegated to field offices instead of deciding those matters at the FBR headquarters. This will provide a window to the traders to manipulate tax rates at field offices. The government would not jeopardise the International Monetary Fund (IMF) programme and any concession would be given only after the IMF's endorsement, said a senior government official.
A few days ago, the government quietly expanded the scope of the traders' scheme to include shops located in residential areas but did not make its decision public. So far, around 205 traders have entered the tax net out of an estimated millions, contributing just Rs500,000 to the Rs50 billion annual target. The FBR has finalised the new income tax return form aimed at meeting the traders' demand for a simplified statement. According to a notification, the traders will be required to declare their total sales, total purchases and total expenses. After that, they will declare the net profit and taxable income.
They will also be required to declare income other than their business, interest income, rental income and whether they have property having fair market value of Rs25 million or more.
Traders are asked to disclose whether they have paid any advance or adjustable income tax during the fiscal year on account of profit on debt, tax on telephone, internet connection, tax on electricity, withholding tax on purchases from distributors, agricultural income tax, tax on sale and purchase of property and on vehicles.
The return form shows that they will be simply disclosing their immovable and moveable assets without giving particulars of those assets. Traders will not be required to give details of bank accounts.
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