ISLAMABAD: Finance Minister Ishaq Dar has softened up to protesting traders and offered open talks on Monday (Aug 3) to hammer out an amicable solution on the issue of 0.3 per cent withholding tax on banking transactions.

Mr Dar spoke with leaders on telephone on Saturday inviting them for talks as he and his team are set to leave on Aug 3 for Dubai for talks with the International Monetary Fund.

Staff-level technical negotiations between Pakistan and the IMF have already started from July 29. The second phase of negotiations will start from Tuesday. After the review, Pakistan is expected to get $550 million under the Extended Fund Facility (EFF) programme.

A well-placed source said the finance ministry was working on an incentive package to be offered to the traders for bringing them in the tax net. The government was considering a fixed minimum tax of Rs15,000 with each return with 25 per cent annual increase in the next three years. The package may include limited exemptions for assets declaration and exemption from three years’ audit.

However, a tax official privy to the meetings with traders told Dawn, “We don’t have any knowledge of any package.” He said the committee constituted by the government to resolve traders issues regarding sales tax will also meet on Monday.

But the source in finance ministry said that one faction of Anjuman Tajiran wanted the fixed tax rate at Rs10,000 as final liability of traders along with filing of tax returns. The traders also wanted unlimited exemptions for assets declarations.

An insider said the finance minister will have to take the IMF on board regarding any package to be offered to the traders community.

The package may be announced after getting clearance from the Fund, the source said, adding that there was no harm in offering such scheme in case the number of taxpayers go up to over two million from less than 900,000 at present. “We have to look at the outcome of the scheme,” the source said.

The FBR anticipates collecting more than Rs30 billion from the tax on banking transactions.

The real challenge for the government will be whether to give one-time blanket exemptions to traders for declaration of their assets from asking about its sources, a tax official said. The government is charging a nominal fee on remittances without asking about its sources, he added.

The PML-N government has already offered amnesty schemes to the country’s elite with incentives to whiten their black money at home and abroad. But a tax official said the IMF was not happy with the scheme.

According to the tax official, it will be a difficult task for the government to announce such a scheme for traders as long as Pakistan is under the IMF loan programme.

The PML-N government’s talk of bringing the rich into the tax net has failed to produce any noticeable results in the last couple of years as only a few hundred people have filed their returns on a voluntary basis.

In its first budget, the government announced that it was launching a project to broaden the tax base.

Later, under a two-pronged strategy, 100,000 potential taxpayers were to be included in the list of taxpayers each year and an incentive package was announced for those who are on tax rolls but have not filed returns for the last five years. Both the schemes failed to produce desired results.

Published in Dawn, August 2nd, 2015

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