Finance Minister Ishaq Dar has said an out of the box solution is under consideration to clear all the pending refund claims of Rs 200 billion and fixed tax scheme for non-filer traders, to be divided into 3 to 4 separate categories for payment of fixed amount of tax under special block. Ishaq Dar informed the National Assembly Standing Committee on Finance here on Thursday that the government is ready to offer a fixed tax scheme for un-registered traders for which a special block would be created, non-filer businessmen would be divided into 3 to 4 categories for payment of a fixed amount of tax by filing tax returns.
The government is actively working on an incentive package for the non-filers businessmen. "I would be very happy if around 4-5 million non-filer traders would come into the tax net under the proposed package," he remarked. Under the proposal, four different categories would be formed for the traders on the basis of city size/potential. The tax amount would be fixed on the basis of each category of traders. For example, ''A'' category would cover big cities like Karachi, Lahore and Rawalpindi. ''B'' category would cover comparatively medium size cities and ''C'' and ''D'' categories would cover small cities. The fixed amount of tax would be collected from each category of taxpayers, depending on the city-wise categorisation ie A,B,C or D.
He showed willingness to create a separate block for the new taxpayers, who would be separately treated for tax purposes under the fixed tax scheme. The number of return filers are now close to million and we are ready to create a separate block for non-filers to bring 4 to 5 million traders into the tax net. Finance Minister said he has convened dozens of meetings with the traders community. The major concern of the business community is that they are afraid of the Federal Board of Revenue (FBR). The concerns of the business community are genuine. Non-filers are maintaining parallel bank accounts in the name of their drivers, employees, cooks to avoid taxes. The government is trying its level best to remove their concerns and bring them into the documented regime. We are ready to facilitate business community to expand the tax base.
He stated that if non-filers are ready to become tax assessees, we are ready to resolve their issues on sectoral basis. He said the government has been able to convince non-filer traders to file their returns. Two groups are actively interacting with the Ministry of Finance/FBR. The first group is interested in regularisation of their assets through an amnesty scheme. The second group is badly affected by the 0.3 percent withholding tax on banking instruments.
He said the government had imposed withholding tax on "Pakistan Real-time Interbank Settlement Mechanism (Prism) transactions under section 236P of the Income Tax Ordinance 2001 due to misuse of the facility. A smart loophole has been plugged by charging WHT on Prims transactions.
On the issue of pending refund claims, Finance Minister Ishaq Dar has said an out of the box solution is under consideration to clear all the pending refund of Rs 200 billion in an effort to avoid their financial impact on federal and provincial governments'' income. Earlier, FBR Chairman Nisar Muhammad Khan stated that at present Rs 88 billion sales tax refunds are pending with the FBR. The FBR has paid 13 percent higher refunds during the current fiscal year as compared to previous period despite a significant cut in revenue collection due to a decline in oil prices in the international market.
Speaking during a meeting of National Assembly''s Standing Committee on Finance, the finance minister said in case of payment of refunds from divisible pool it would cause serious consequences on federal and provincial government''s income. "If such a huge amount is taken out of the divisible pool collections, the income of provinces and federal government would reduce considerably," he said adding that all the pending claims up to May 201 of textile sector were cleared.
He said that an "out of the box solution" to clear the refunds claims is at premature stage and once it is finalised, government would share it with the committee. Dar admitted that the present cycle of refunds'' clearance is not satisfactory but the government does not want to inflict any hit on the provinces. Chairman of the Finance Committee Qaiser Ahmad Sheikh observed that the blockage of refund claims is creating a liquidity crunch for the exporters. Business community is facing cash flow problems and everybody is making a hue and cry over the pending refund claims.
Dar further stated that low oil prices have not benefited the country in terms of foreign exchange saving as there is a considerable increase in import of luxury items in the meanwhile. "State Bank of Pakistan (SBP) is concerned as imports have increased dramatically despite low oil and commodity prices in the international market. He said the expected saving of $3.5 billion in current account is not possible because of a massive increase in imports of luxury items'' import. The government is considering taking preventive steps against the factors putting pressure on current account deficit and foreign exchange reserves, the minister added.
The minister dismissed analyses that rupee was overvalued and stated that Pakistan rupee against other currencies was under valued by 12 per cent". "We have made our mind that rupee is pegged to US dollar while rupee against other currencies is appreciated by 12 percent," Dar added. He stated $900 million IDA loan for energy reform would be added to foreign exchange reserves in the current year. The tenor of loan would be 25 years with a five-year moratorium period and 2 a percent interest rate.
The Finance Minister and committee members have agreed to have an exclusive session on the macroeconomic indicators for taking the parliamentarians into confidence on current economic situation. Dar suggested that the committee can hold a meeting in next two to three weeks to take a briefing from him on the current situation.