Only 4 New Traders File Under FBR Tax Scheme

Only four newly registered traders submitted tax returns under the government’s fixed-tax scheme before the statutory deadline, leading the Federal Board of Revenue (FBR) to admit that participation remained far below expectations and warn that tougher action could follow against retailers who continue to remain non-compliant.

FBR Chairman Rashid Mahmood Langrial told the Senate Standing Committee on Finance that the scheme had received a disappointing response, despite the government’s effort to attract traders into the formal tax system through a simplified taxation framework.

Langrial said traders had effectively defeated the government’s “good faith” approach, dismissing technical problems with the filing application as an insufficient justification for failing to submit returns.

FBR Member Operations Zubair Bilal informed the committee that 787 returns had been submitted under the new scheme so far, with just four belonging to newly registered filers.

The government introduced the 1% fixed-tax arrangement for retailers, allowing participating businesses to avoid audits and Point of Sales system installation in exchange for paying the prescribed fixed tax.

Minister of State for Finance Bilal Azhar Kayani said traders had been consulted before the scheme was introduced and expressed hope that participation would rise once the FBR started taking action against businesses that remained outside the system.

Kayani warned that stronger enforcement could become necessary if traders refused to join the scheme and existing penalties failed to persuade them to comply.

He said 10,338 retailers had registered through the application during its first two months, including 2,337 new registrations, but only a limited portion had gone on to file their returns. The scheme applies to traders recording annual sales of up to Rs200 million.

When questioned about the possibility of collecting Rs50 billion from traders during the current fiscal year, Langrial said revenue could potentially surpass Rs100 billion if the scheme succeeded, while collections would remain negligible if participation remained weak.

Non-compliant traders are expected to face penalties introduced in phases, starting with a Rs10,000 fine, followed by Rs25,000 at the second stage and Rs50,000 at the third.

FBR Member Strategic Transformation Dr Hamid Ateeq Sarwar said the tax authority would continue pursuing traders who failed to submit their returns.

The poor response to the traders’ scheme came as the government extended the deadline for filing tax returns across the board by 15 days. By the September 30 statutory deadline, the FBR had received 5.7 million returns compared with 19 million registered taxpayers.

Langrial noted that despite the shortfall, the number of filers was still 1.7 million higher than during the corresponding period last year.

Separately, the FBR achieved its first-quarter revenue collection target of Rs3.03 trillion.

The Senate committee, chaired by Senator Saleem Mandviwalla, agreed to examine the implementation of the traders’ scheme again after one month. Langrial cautioned, however, that there was a possibility that little could change by that time.