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Amnesty scheme quietly shelved

Amnesty scheme quietly shelved

ISLAMABAD: The much-hyped tax amnesty scheme, aimed at documentation of informal retail businesses, has been rolled back due to the lukewarm response from the traders community.

Finance Minister Ishaq Dar had launched the money-whitening scheme — Voluntary Tax Compliance Scheme (VTCS) —which was approved by the National Assembly and came into effect on Feb 1, 2016 amid much fanfare. At the time, Mr Dar had expressed the hope to net one million traders. However, only 9,020 traders had availed themselves of the scheme and contributed a meagre Rs850 million until April 30, 2016.

Federal Board of Revenue Spokesperson Dr Muhammad Iqbal confirmed to Dawn that the scheme was discontinued from May 1, 2016. Asked whether it was replaced with some other scheme for traders, the spokesperson said there was no such proposal currently under consideration.

In the last week of April, FBR has submitted a summary to the Economic Coordination Committee (ECC), seeking extension in the lower rate of 0.4 per cent withholding tax on banking transactions and extension of the tax scheme.

A well-placed source told Dawn that the ECC only extended the lower rate of withholding tax until May 31 in its meeting on May 7. It only came to the knowledge of the tax machinery later that the proposal regarding extension in the tax scheme was dropped, the source added.

Even the press release issued by the finance ministry after the ECC meeting did not mention that the tax amnesty scheme was discontinued. The FBR too kept silent over the issue, the source added. As a result, confusion prevailed over the availability of the scheme among the traders’ community, the source said.

This was not the first scheme of the PML-N government to have failed to meet expectations. In November 2013, Prime Minister Nawaz Sharif had announced an amnesty scheme for industrialists to whiten their black money by investing in certain sectors. The move, however, failed to expand the tax base or garner investment in the prescribed sectors as had been hoped.

In budget 2015-16, the government imposed 0.6 per cent withholding tax on banking transactions. The levy mostly affected traders. To compensate traders, the finance minister had developed the amnesty scheme.

Sales tax proposal for budget

The FBR had started a new initiative in fiscal year 2014-15 to bring the retail trade into the tax net. Under this initiative, retail trade was bifurcated into two tiers.

Small retailers under the tier 2 scheme are being charged presumptive general sales tax (GST) as part of their monthly electricity bills at varying rates according to the amount of electricity consumption.

“No change will be made in this scheme,” Dr Iqbal confirmed to Dawn.

Contrary to this, large retailers, which are placed in tier 1 scheme, are being registered under the GST law for normal taxation. FBR currently identified 15,000 large retailers. “We had already registered about 6,500 retail outlets by end December 2015,” the tax official said.

To make a big breakthrough in the narrow sales tax base especially in the large retail sector in luxury shopping malls and plazas, a budgetary proposal is under consideration to propose 2pc turnover tax for large retailers in the budget 2016-17.

“This is just a proposal for expanding the sales tax base,” the spokesperson said, adding that it can be considered or dropped before finalising the budget in the first week of June.

Courtesy : Dawn News



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