Pakistan tax amnesty scheme fails to attract traders

Tuesday, Mar 15, 2016,14:58 IST By Metrovaartha A A A

Islamabad | A major initiative by cash- strapped Pakistan government to attract businesses to pay taxes has received lukewarm response as only 3,000 traders paid-up for the scheme against the target of 1 million new tax-payers.

The tax amnesty scheme which will expire today was launched on February 1 after parliament approved the Voluntary Tax Compliance Scheme, and the government offered the traders to legalise up to Rs 50 million worth of hidden working capital by paying 1 per cent of the declared amount in tax.

Finance Minister Ishaq Dar said after launch of the scheme that he would bring at least 1 million of them in the tax net. The Express Tribune reported that as the scheme ends today, only 3,205 people have availed it, paying a paltry sum of Rs 318 million along with tax returns. Today is the last day for filing the income tax returns by individuals and companies for the tax year 2015, a process that should have been closed on September 30 last year.

So far, the government has given six extensions in the date for filing the tax returns and the seventh one is on the cards. Despite six extensions, only 9,24,000 people have filed the returns, including the traders, a figure which is 122,000 less than the previous year. The number of tax return filers for the tax year 2014 stood at 1.047 million and (now) it is 923,346 for tax year 2015, Finance and Revenue Minister Ishaq Dar stated in a written reply to the Senate last week.

Sources in the Federal Board of Revenue (FBR) say that a strong political will is required to take coercive measures against the tax evaders. They said the tax machinery could not do much as long as the government is in a compromising mood. It is believed that current Pakistan Muslim League-Nawaz (PML-N) government hugely relies on the vote back of about 2.8 million traders who are doing business but are reluctant to pay taxes.

In the current fiscal year’s budget, the government had levied 0.6 per cent tax on all banking transactions above Rs 50,000 carried out by non-tax filers, which became the base for negotiating an amnesty with the traders.

Later on, it reduced the rate to 0.3 per cent, which Dar increased to 0.4 per cent on February 29 while extending the date for filing the returns. The FBR is proposing the government to restore the rate back to 0.6 per cent, as a lower rate is giving a wrong message to the traders that the authorities were not serious about broadening the tax base.