‘FBR versus traders’

September 18, 2019

Email

THIS is with reference to the editorial ‘FBR versus traders’ (Sept 9).

Traders are not tax-evaders. There are four kinds of taxes which are major contributors in total tax revenue and are paid at source.

Traders have nothing to do with the payment of these at-source taxes. These taxes are customs duty, sales tax, further sales tax and federal excise duty. All these taxes are collected at-source from the manufacturers and importers.

Only income tax is payable by traders. No traders’ body is against the concept of documentation of economy. However, the real issue is unnecessary documentation and unjustified taxation.

For example, the Federal Bureau of Revenue is adamant to register all traders in the sales tax net whereas the sales tax of maximum retail price items already stands paid at 17 per cent at source.

In sum, all sales tax supposed to be paid by the general public stands paid in full, for both MRP and non-MRP items, at source, at the time of purchase by the traders not a penny of sales tax liability thus remains outstanding. Hence, traders’ bodies rightfully question why traders are being compelled by the government to become sales tax registered. Any evasion in sales tax is occurring only at the level of manufacturer and importer and the same must be addressed at their level. Traders must not be made scapegoats in this regard.

Another major component of tax revenue is withholding tax. There are 3.1 million commercial electricity meter holders/traders in Pakistan. All these traders are supposed to be IT filers. However, only 0.45 million traders file their income tax returns. The threshold for filing income tax return for traders is Rs400,000 annual income. All commercial meter holders are either above or below this threshold and pay 10pc WHT on commercial electricity bills, as well as file income tax returns in case their annual income is above the aforestated threshold. Hence all traders are paying their applicable share in payable income tax regime. Traders who don’t file income tax returns have to pay all withholding taxes which are double in amount as compared to filers and non-adjustable as well.

What is the root cause of evasion of taxes? The problem lies at the doorstep of manufacturers and importers.

The government is advised to devise a foolproof inspection regime to ensure the production of genuine sales document at the manufacturer/importer level, rather than harassing the traders.

Muhammad Naeem Mir
Central Secretary General
All Pakistan Anujman-i-Tajran
Lahore

Published in Dawn, September 18th, 2019