EDITORIAL: One can only wish the government good luck as it now tries to collect an estimated Rs500 billion from a new simplified scheme for registration of retail traders, one of the most grossly under-taxed sectors of the economy.
The proposed, simplified scheme will allow traders and retailers to deposit payable tax in 12 monthly instalments. It’s widely lamented that the retail and wholesale sector contributes about 18 percent to GDP, but only four percent to taxes. That’s because they always blackmail the government with strikes, etc., whenever the tax net is extended to them.
Therefore, it remains to be seen why this latest smart idea, the so-called simplified scheme with monthly instalments, will work where all other initiatives and incentives have failed. The point is that this sector, along with a few others, is bent upon resisting all efforts to be properly taxed.
And that’s only because they have tricks up their sleeves, like shutting down the whole country in protest, to frustrate the taxman. There’s also the fact that they have strong ties with all administrations, since they finance campaigns of most political parties, and can wriggle out of such difficulties with a few phone calls when all else fails.
That’s why the government first needs to sort itself out. Surely, the coalition government that is about to take over will understand that tax reforms cannot be kicked any further down the road. The economy is on the brink of a very serious collapse.
And we’re only able to avoid default as long as we are on an active IMF programme. That’s why major IFIs (International Financial Institutions) are already questioning the ability of a weak coalition government to successfully negotiate a new bailout facility with the Fund when the SBA (Stand-By Arrangement) expires next month.
At the heart of the IMF’s structural adjustment demands is showing an increase in revenue. And unless big sectors like retailers are progressively taxed now, it’s not going to be possible to create enough fiscal space to satisfy IMF’s revenue conditions and keep its tranches coming.
Let there be no mistake that any violation of any condition at any time during the programme will lead to its immediate suspension, which means debt payments to the tune of tens of billions of dollars will become obligatory during this fiscal, and the country will tumble into default because there just aren’t enough reserves to make those payments at the moment.
Besides, proper taxation of these segments will also lead to better documentation and a reduced black economy. It’s been reported that the FBR chairman has proposed a simplified scheme to determine indicative income of traders until a proper digital taxation system can be institutionalised.
It has been based on the location, value and rents of shops. They’re also throwing in a sweetener of a 50 percent discount for retailers who file tax returns for 2023 before the first monthly instalment.
Hopefully, this scheme will work as intended. If not, retailers will leave the government no choice but to force due taxes out of them.
Copyright Business Recorder, 2024