TUESDAY JUNE 21: Departmental stores, big retail outlets required to display NTNs, STRNs: survey from next month

ISLAMABAD: The government has decided to conduct national tax survey of departmental stores, business establishments, and big retail outlets, from next month, to check whether such units have prominently displayed their National Tax Numbers (NTNs) and Sales Tax Registration Numbers (STRNs) at business premises to document the unregistered persons.
Sources told Business Recorder here on Thursday that the idea was discussed between the top brass of Ministry of Finance and Federal Board of Revenue (FBR) to go for its implementation from July 2011, and the FBR reportedly finalised all preparations for launching the survey.
The FBR has planned to hire students from universities and colleges for carrying out the survey from the third week of July 2011. The main purpose of the survey is to improve documentation, for which display of the NTNs/STRNs at the business premises is one of the most important steps towards it. The FBR will pay honorarium and certificates to the students who would be engaged in the exercise. During three months' period of summer vacations, the FBR will engage students to visit posh markets and departmental stores in this regard.
When asked whether students would check turnover/sales of units and maintain parallel books of accounts, sources said that the students do not have the expertise to examine the books of accounts or verify tax-related data at the business establishments and shops. However, they would be given authorisation letters from the Board to go to potential shops and check whether units have prominently displayed their NTNs at business premises. They would also inform the owners of shops about the necessity of displaying of the NTNs outside the outlets in cases where units are already registered with tax department, but are not following the law. In this way, the FBR would be in a position to have ample data of those units where NTNs have been prominently displayed outside the retail outlets.
Sources said that the FBR wanted to enforce a provision of the income tax law to ensure that every shop/outlet in famous markets, shopping malls, and renowned departmental stores prominently display their National Tax Numbers (NTNs) at their business premises. The provision was available in the income tax law but was never invoked by the field formations. The implementation of this simple provision of law would immediately bring thousands of shop, departmental stores and other units within the documented regime in all major cities.
At pesent, it is not easy for the tax department to immediately ascertain whether a particular person, who is doing business or trading is a taxpayer or not. In case the FBR fully enforces this simple provision of the income tax law, it would bring thousands of big shopkeepers in the formal regime following easy verification of the NTNs. Once the NTNs have been prominently displayed at the business premises, it would be very easy for the tax officials to check the NTN and verify whether the shopkeeper has filed income tax return.
At present, it may take several months to trace out a unit for verification of the NTN at the business premises as NTN certificates have not been displayed by the taxpayers at their place of business. It is a requirement under the law to prominently display their NTN at the business place. However, due to non-compliance, it is very difficult for the tax department to ensure that the business unit has obtained NTN or not. In many cases, the NTN is not in the name of business name, which create problems for the tax department to verify the tax status of owner of a departmental store of shopping mall.
If all the big shops and outlets in all shopping malls and renowned departmental stores started prominently displaying their NTNs at their shops, tax department can easily identify the NTN holders for verification of their return filing for documentation purposes, sources added.
Under the existing law, section 181 of the Income Tax Ordinance, 2001 requires every person to obtain National Tax Number (NTN), if he is deriving income chargeable to tax. If the person derives income from business chargeable to tax, the Rule 83 of the Income Tax Rules, 2008 clearly makes it mandatory to display this NTN card at a conspicuous place of business at every place of business. The Rule 83 says, "every person deriving income from business chargeable to tax who has been issued with a National Tax Number Card shall display the person's National Tax Number at a conspicuous place at every place of business of the person."
The FBR has the authority to serve notice to the non-compliant persons or owners or big outlets having NTNs but not filing their income tax returns. In this connection, the FBR will take trade bodies and chambers in confidence before launching of any campaign regarding display of NTN outside of the business premises, sources added.
It is worth mentioning that the proposed strategy is that FBR would conduct the survey through educated youth of universities and colleges by their deputation at business premises, big departmental stores and retail outlets in posh areas of the country. The reported compliance of the existing sale tax is considerably low and the economic managers have been seriously considering to improve the compliance rate as well as to effectively cope with the under-reporting. The government has been facing severe criticism from the coalition partners and opposition about the performance and alleged corruption in tax collecting authority. The tax machinery has to improve enforcement and compliance at any cost to raise the tax-to-GDP ratio and improve documentation. The recent experiment of deputation of sales tax officers at restaurants and hotels has substantially increased their turnover/sales up to 700-900 percent due to regular monitoring at the business premises.
In the past, the government had agreed to provide free of cost electronic cash registers to the retailers, but the owners of such big shops were not ready to install such electronic cash registers at their shops. The facility of electronic cash registers was given to the retailers etc to document each and every transaction, but the scheme could not be implemented.
Sources said that if the experiment of deputing educated students at famous retail outlets would be successful, the same would be replicated across the country. Instead of sending tax officers to the field formations, the deputation of educated youth would be a soft way to ensure that every registered person must display his NTN outside the business premises.