Tajir Dost Scheme: unfriendly response?

EDITORIAL: A Business Recorder exclusive has revealed that 58,000 out of 3.2 million small traders/shopkeepers have...
Updated 15 Aug, 2024

EDITORIAL: A Business Recorder exclusive has revealed that 58,000 out of 3.2 million small traders/shopkeepers have registered under the Tajir Dost Scheme with 50 billion rupees budgeted to be collected under this advance tax in the current year – or a mere 1.8 percent have so far registered which raises serious questions about the scheme’s acceptability.

The question is if the tax itself is considered too high by the traders/shopkeepers.

This does not appear to be the reason behind the very small number of registrations as the Federal Board of Revenue (FBR) has issued a market/area wise indicative income tax that is to be paid every month and has identified 14 markets across Pakistan where the tax payable will be 10,000 rupees per month with: (i) 60,000 rupees per month in 0.40 percent of the areas; (ii) 45,000 rupees per month payable in 0.6 percent of the areas; (iii) 30,000 rupees per month in 2 percent of the areas; and (iv) 20,000 rupees per month tax payable in 5 percent of the areas. In the rest of the 78 percent of the areas 5,000 rupees per month would be payable while a kiosk (khokha) measuring 5 times 3 square feet would be liable to pay advance tax of 1200 rupees per annum. A 25 percent discount would be available if payment is made for the entire year.

The actual grouse of the traders’ vis-a-vis the Tajir Dost Scheme is not that it is a very complicated form requiring the services of an accountant with associated costs as the FBR has issued a simple tax form in Urdu to facilitate registration but the fact that that the payment specified does not constitute final discharge of tax liability. In other words, they want to be subjected to a final tax regime aka FTR.

This cannot be offered to them because the International Monetary Fund (IMF) is opposed to such incentives and reportedly because of the Fund’s insistence the incentive that pledged final tax regime to exporters has been withdrawn. In other words, the tax regime that has been proposed by the FBR may be acceptable to the traders/shopkeepers if they are assured that it is the final tax for the year with no proof of documentation and assessment by the FBR.

It is important to note that Business Recorder has consistently supported widening the tax base, though advising caution that the implementation of some envisaged taxes particularly those pertaining to the 3.2 million traders/shopkeepers would take time as past precedence shows effective organised resistance; however what is baffling is that a much fairer and equitable tax that can be implemented by the provincial governments at one go has been completely overlooked yet again this year, notably farm income tax at the same rate as payable by the salaried class. Reliance of provincial governments particularly in the Punjab and Sindh provinces that are major producers of crops, in alliance with stakeholders, on the divisible pool continues unabated with the farm tax at the present rate insignificant as a revenue source.

The Special Investment Facilitation Council (SIFC) with across the board political as well as other key stakeholder representation has not discussed farm income tax leave alone reached an agreement on the rate that should be applied to those whose farm income is a lot more than a salaried individual (whose income tax is cut at source). Instead, the Finance Act for the current year envisages higher taxes on the already taxed salaried class, burdened by the weekly significant rise in the Sensitive Price Index (SPI) - 17.96 percent for the week ending 8 August 2024 – while not taxing the rich landlords no doubt for political reasons as the national and provincial assemblies are heavily represented by this particular group. This has to and must change. Neither the general public nor the donors are in any mood to continue to grant concessions/incentives to the rich/elite and one would hope that the federal and provincial governments take cognizance of this fact before public discontent gathers further momentum to spill out on our streets.

Copyright Business Recorder, 2024

Read Comments