Poor response from retailers, wholesalers: installation of ETRs at big shops not possible

The Federal Board of Revenue (FBR) decision to install modern electronic tax registers (ETR) at big shops of retailers and wholesalers would be impossible to implement in view of retailers' poor response to different low rate tax schemes.
Tax experts told Business Recorder on Wednesday that FBR had empowered the Commissioners of Income Tax to install electronic tax registers (ETRs) at selected shops of retailers and wholesalers to document their actual sales and turnover on daily basis.
The Board has extended these powers to the commissioners through Finance Act 2008 to ensure correct recording of sales. The ETRs would be installed at selected wholesale and retail outlets with known high volume of business as decided by the Commissioner. This technology is being used in a number of countries like Italy, Greece, Poland, Ukraine, Bulgaria, Finland, Malta, Serbia, Lithuania, Hungary, Turkey, Brazil etc. The FBR has amended Income Tax Ordinance, 2001 and Income Tax Rules, 2002 to give effect to enforcement of the decision.
According to sources, there are a large number of limited companies which are not properly maintaining their books of accounts. Many large companies are declaring losses in their returns. If this is the situation in documented sector, it would be practically impossible to install such equipment at retail outlets.
In the existing tax culture, the commissioners would face serious enforcement problems in case they try to install such ETRs at big retail outlets or wholesalers. In budget 2007-2008, the FBR had notified a lucrative scheme to document the entire retail sector. However, the board received extremely poor response to this scheme.
Retailers had agreed to pay the nominal amount of tax with the promise to increase the number of income tax filers within the retail sector. Since implementation of the scheme from July 1, 2007, sources said, there has been a nominal response from retailers to the scheme, which was designed in view of the recommendations of the All Pakistan Traders Association (APTA).
If retailers are not prepared to pay nominal amount of income tax, whether they would allow the income tax department to install ETRs at their leading outlets, sources said.
There are a large number of retail outlets which are deliberately suppressing their sales to avoid taxes and documentation. The annual sales declared in the income tax returns are much lower that the actual turnover of sales taking place at their outlets on day to day basis. However, it would be difficult to document retailers and wholesalers through such electronic devices.