Reversal of fixed tax

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Through pressure tactics, traders have once again managed to get fixed tax revoked, seriously indicating how tax evasion has become a norm in our society and that is one of the reasons of lowest tax to GDP ratio in the entire region.

Chairing a meeting on Saturday, Prime Minister Shehbaz Sharif announced immediate suspension of fixed sales tax collection from retailers/shopkeepers through electricity bills.

The government had decided to collect a fixed tax from retailers through electricity bills. The tax rate was decided to be Rs3,000 on a monthly bill of up to Rs30,000; Rs5,000 on a bill ranging from Rs30,000 to Rs50,000 and Rs10,000 on a bill above Rs50,000.

These tax rates were to be doubled for retailers not on the Active Taxpayers’ List. There may be some genuine concerns of the traders such as they were of the view that after including taxes, their per-unit electricity cost would shot up to Rs43, which they could not afford.

The cost was feared to increase further during billing cycle of upcoming months due to government’s decision to increase electricity prices on account of annual tariff hike and monthly fuel price adjustments.

There is no denying that traders and industrialists should be facilitated to promote their businesses yet at the same time they have to understand that their contribution to tax collection is a must if we really want to take the country towards self reliance.

Instead of taking to streets and shutting down businesses, it would have been better for traders to sit with government to get tax rate rationalised.

According to FBR data, trading and wholesale make up roughly 19pc of GDP but chip in a minuscule Rs6b in taxes to national exchequer.

Out of about 2.3 million traders and shopkeepers in the country, hardly 5,000 file tax returns.

While Prime Minister has rightly directed to take on board traders’ representatives for new mechanism regarding collection of taxes, it is also for traders to realise their responsibility towards the country.

The government must also come up with a mechanism that exploits true potential of tax collection from this sector while ensuring that small shopkeepers are protected and not overburdened.

Those doing business of gold and electronics in commercial hubs such as Saddar and Sarafa bazaar must pay more tax than small retailers running their shops in residential areas.

Since electricity bills carry addresses, taxes can be fixed accordingly. The government must also bring other sectors and affluent class into the tax net that are still enjoying exemptions.

The words of a former tax collector sum up the reality of the country’s deep malaise: In Pakistan ‘the poor subsidise the rich.

’ This must be reversed if we really want to address the chronic issues of the country including that of poverty, backwardness, illiteracy and so on.

 

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