The Federal Board of Revenue (FBR) on Thursday unveiled drafts of simplified income tax schemes to address traders and small shopkeepers’ concerns that had compelled them to remain outside the tax net.
The FBR issued the rules for Income Tax Special Procedure for Traders, Income Tax Special Procedures for Small Shopkeepers and Obtaining and Issuance of Business Licences. These rules will be enforced after seeking the approval of the federal cabinet.
The rules have been issued two weeks ahead of the traders association’s three-day strike call against the FBR’s new taxation measures.
These businesses and people have been excluded from the normal income tax regime. All those people and traders who are registered with the FBR but did not submit their annual income tax returns have also been declared eligible for the new scheme for traders. There are nearly 4.8 million registered income tax persons in Pakistan but only 2.2 million filed their annual income tax returns for tax year 2018.
The traders have been offered five key benefits. They will be exempted from audit, they would not be bound to submit income tax returns to a particular tax office, they will not act as withholding agents for the FBR and their income tax returns and wealth statements will be simplified.
However, the traders will pay normal income tax, unlike small shopkeepers who have been offered to pay only 2% of turnover or up to Rs40,000 fixed annual income tax.
The traders will not be bound to pay advance tax but if they like they can discharge their liability in four advance equal tranches.
The FBR said that the simplified scheme for the traders has been proposed to address complicated tax regime and equally complicated requirement of record keeping. The new proposed regime will also address the issue of complicated return form and wealth statement and reduce personal interaction and personalised jurisdiction that has high probability of abuse of discretion even leading to corruption and harassment, according to the proposed draft.