FBR finds misuse of tax compliance scheme

Updated May 24, 2020

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FBR has found that many traders availed tax scheme but did not register themselves under sales tax act and to discharge their sales tax liabilities. — APP/File
FBR has found that many traders availed tax scheme but did not register themselves under sales tax act and to discharge their sales tax liabilities. — APP/File

ISLAMABAD: The Intelligence and Investigation Department of the Federal Board of Revenue has unearthed misuse of a special voluntary tax compliance scheme for traders, causing a revenue loss of billions of rupees to the government exchequer.

In 2016, the then government introduced a special regime for traders to pay tax on turnover, working capital in a simple way for TY15-TY18. The scheme was to broaden the tax net by facilitating non-filers and certain filers.

As per the scheme, traders have exempted from income tax audit and assessment as well as an undeclared source of income. However, no exemption is available to traders with regard to sales tax and federal excise duty.

The Intelligence and Investigation Department has detected misuse of the regime as part of an analysis of voluntary compliance scheme. Many traders availed it but did not register themselves under the sales tax act and to discharge their sales tax liabilities.

A senior tax official told Dawn that the scheme was only to facilitate traders in filing their income tax returns in a simplified manner and they were bound to pay sales tax liabilities after availing it.

During the exercise, Karachi-based traders were identified who availed the scheme but didn’t register themselves under the sales tax act, according to the official. “We have sent their cases to relevant departments for a further probe,” they said.

The directorate also suggested to chief commissioners of Large Taxpayers Units, (I&II), Corporate Regional Tax Office (CRTO), and Regional Tax Offices (II, III) in Karachi to further probe the issue.

The scope of examination should also be extended to other parts of the country to identify traders who misused the scheme.

The scheme was introduced for traders who had not filed any return of income until December 31, 2015, in respect of the preceding 10 tax years.

Published in Dawn, May 24th, 2020