Negotiations between the Federal Board of Revenue (FBR) of Pakistan and traders remained inconclusive regarding the trader-friendly scheme. Both parties met on Monday to reach an agreement, but no deal was sealed.
Formation of Committee by FBR
FBR has proposed composing a committee with business representatives to examine the uniform fair market rate of PKR 60,000 for the 84 markets in the country and other issues. The Rate Revision Committee will also consider changing this rate because some wholesalers say they do not make the figure facilitated by the standing income ceiling.
If any retailer claims net income less than the fixed net income level, the Rate Revision Committee will accept such claims by reducing the applicable tax rate. However, the retailers did not welcome this proposal during the negotiations on Monday.
Case of the Retailers Cut Noices Scheme
Retailers have outright rejected the FBR’s trader-friendly scheme, stating their commitment to creating a better alternative that encourages compliance among retailers nationwide. Their main worry is how the proposal addresses some of the operational issues of small businesses today and adds more cost to them in the future.
The retailers’ position has effectively stopped the negotiations, as both parties appear to be rooted in their respective positions. Even though the FBR appears willing to make changes, the retailers’ wide-scale animosity against the scheme goes to the challenges that come with implementing a tax collection scheme, which, more often than not, does not satisfy all the players in the scheme.
FBR’s Response
An FBR representative remarked that the development of the Country’s taxation system would involve the active participation of the retailers: “We asked the retailers to suggest any plan that could help to generate taxes around PKR 100 billion, and they refused it. They still refuse to be in the income tax net, but this is not how it works anymore. ”
Ultimately, the FBR wishes to push for a compromise that will further develop retailer compliance without placing unnecessary burdens on small businesses on taxation services. The current deadlock indicates that we will attain such an objective, but it will require more rounds of compromise and, most likely, more creativity from either party.
The impasse between the FBR and retailers brings to the surface the issues surrounding tax reforms in Pakistan, specifically, the equity of small businesses in tax collection. The deadlocks will necessarily push both parties into the required compromise, leading to the creation and nationwide implementation of an accommodative scheme. Resolving the issues emerging from these discussions will be important, as they will influence the future tax policy of retailers in Pakistan.
