Amnesty scheme: Out of 2.8m traders, only 3,205 pay tax

Major tax evaders – the traders who happen to be traditional voters of the ruling party – are not ready to come into the tax net, as only 3,205 people have so far filed returns under the tax amnesty scheme.

The government’s all-carrot policy has failed to encourage 2.8 million traders who are doing business but are reluctant to pay taxes. While making the tax amnesty scheme operational from February 1, Finance Minister Ishaq Dar had vowed that he would bring at least one million of them in the tax net.

It is neither ready to suspend the Computerised National Identity Cards (CNIC) of those who opt to remain out of the tax net nor it is ready to penalise them by charging the original 0.6% withholding tax on banking transactions.

After seeing the embarrassing results, Dar had announced an extension of the scheme to March 15, hoping that a large number of traders would avail themselves of the scheme this time.

However, as the extended period ends on Tuesday, only 3,205 people have availed of the scheme, paying a paltry sum of Rs318 million along with tax returns, showed the figures by Monday evening.

Tuesday will also be supposedly the last day for filing the income tax returns by individuals and companies for the tax year 2015, a process that should have been closed on September 30 last year.

So far, the government has given six extensions in the date for filing the tax returns and the seventh one is on the cards.

Despite six extensions, only 924,000 people have filed the returns including the traders, a figure which is 122,000 less than the previous year.

“The number of tax return filers for the tax year 2014 stood at 1.047 million and (now) it is 923,346 for the tax year 2015,” Finance and Revenue Minister Ishaq Dar stated in a written reply to the Senate last week.

Sources in the Federal Board of Revenue (FBR) say that a strong political will is required to take coercive measures against the tax evaders. They said the tax machinery could not do much as long as the government is in a compromising mood.

The officials said the FBR could not be blamed, as the government itself was reluctant to take strict action against the non-filers of income tax returns.

Parliament had approved the tax amnesty scheme, called the Voluntary Tax Compliance Scheme. The government has offered the traders to legalise up to Rs50 million worth of hidden working capital by paying 1% of the declared amount of tax.

Withholding tax issue

In the current fiscal year’s budget, the government had levied 0.6% tax on all banking transactions above Rs50,000 carried out by non-filers, which became the base for negotiating an amnesty with the traders.

Later on, it reduced the rate to 0.3%, which Dar increased to 0.4% on February 29 while extending the date for filing the returns.

The FBR is proposing the government to restore the rate back to 0.6%, at a lower rate is giving a wrong message to the traders that the authorities were not serious about broadening the tax base.

Due to the continuously embarrassing results, the government is now contemplating that both the date for filing income tax returns and the amnesty scheme should be extended by another 15 days till the end of this month, said officials.

Despite dismal results, the federal government is still reluctant to negotiate with a big section of the traders, the Khalid Pervez Group, which is backed by the government of Punjab. The government had expected that the Naeem Mir Group would deliver but it failed.