Incentive schemes for ST registration: FBR to study 3 countries' tax administration

The Federal Board of Revenue (FBR) has decided to conduct study of three tax administrations which have launched incentives schemes for increasing sales tax registration through an effective 'Lottery Scheme'. Sources told Business Recorder here on Monday that the efforts made by the FBR in the past for launching of 'Lottery Scheme' or 'Consumer Lucky Draw Scheme' failed due to one reason or the other.
Now, the study of three countries, which have launched incentive schemes for sales tax registration, has prompted the FBR to come up with an 'effective' lottery scheme. In Turkey, and some states in the USA, such incentive schemes were introduced to encourage implementation of the value-added tax (VAT). It has also been noticed that the countries which launched the incentive scheme had also ensured implementation of issuance of sales tax invoices by the sales tax registered persons. It is important to note that normally it is made absolutely clear in the tax administration policy that no action will be taken against the person providing details of invoices and participating in the lottery schemes.
The scheme may initially be initiated as a pilot phase in Islamabad as since sales tax on services is now a provincial subject. The FBR has given assignment to a seasoned tax official and FBR Member (Enforcement & Accounting) Aminullah Khan to provide an update on the study.
It is important to mention that the FBR had drafted a scheme of 'consumer lucky draw' in the past, which was never launched. Earlier, the FBR had planned to launch Consumer Lucky Draw Scheme in January 2011 in all major cities including Karachi, Lahore, Sialkot, Faisalabad and Islamabad with monthly prizes of Rs 6 million to encourage documentation of the economy. At that time, it was decided that the scheme would initially be for hotels and restaurants but extendable to bakeries and caterers. This scheme envisaged various prizes with maximum and minimum individual prizes of Rs 100,000 and Rs 5,000 respectively, in the descending quantum but ascending number of about 350 prizes, would be worth Rs 6.0 million per month. These prizes were to be awarded through balloting to those consumers of the hotels/restaurants who produced the original invoices of their payments to the hotels/restaurants. Initially, this scheme was only for the registered hotels/restaurants. Later invoices and receipts obtained from bakeries and caterers would be considered for the draw to attract consumers.
The FBR had also constituted a steering committee for this scheme, but the Consumer Lucky Draw Scheme was not implemented by the due date ie, January 2011. The launching date of the scheme was further delayed to March-April 2011. Later, the statutory regulatory order (SRO) of the Sales Tax Lucky Draw Scheme (STLDS) 2011 was sent to the Law and Justice Division for vetting, but the same was not implemented by the FBR. The FBR had also drafted the Sales Tax Lucky Draw Rules-2011, which was not enforced due to non-implementation of the scheme.
According to the draft of the Sales Tax Lucky Draw Rules-2011, this was the first Consumer Incentive Scheme of its sort to be launched by FBR, FBR endeavour was to cover restaurants and similar food outlets, registered under Sales Tax Act 1990, through a lucky draw scheme to encourage voluntary registration of all those who are liable to pay/collect sales tax and ensure that the tax deducted is also deposited into government treasury.
The scheme envisaged to promote voluntary registration of restaurants and food outlets, promote documentation through issuance of invoices and to plug revenue leakages and was issued under powers vested in FBR under preamble to FBR Act 2007 and section 4(1) (1) of the said Act.
Under the STLDS-2011, the FBR would monitor the scheme's effectiveness through laid down parameters. The parameters included number of new registrations after launch of scheme; increased tax paid on returns by existing taxpayers; increased tax paid on returns by new taxpayers; number of audits conducted as a result of the scheme; tax levied in audit as a result of the scheme; invoices received during the scheme which were not verified due to outlet being below tax threshold.
The rules said that the scheme aimed at achieving the following objectives for the restaurants /food outlets sector: Promoting documentation; help in plugging of revenue leakages; increased voluntary sales tax registration; broaden tax base through invoice based information and create a data bank to deter tax evasion.
This scheme covered invoices issued by restaurants/food outlets all over Pakistan. The customers availing food from restaurants/food outlets wold obtain invoices (receipts, cash memos) and inform FBR in the manner prescribed. The customers sending information of invoices along with their CNIC number under the Scheme would be called participants in the scheme. The participants would be subject to lucky draw through computer ballot to determine cash prizes. The personal information of participants will not be used for tax purpose in their individual cases.
However, the information received regarding sales by restaurants/food outlets shall be utilised by FBR for objectives of documentation. Despite drafting of the said Sales Tax Lucky Draw Rules-2011 and SRO, the FBR did not launch the scheme, sources added.