With the scheme, for the time being, effectively ending on February 29, the government’s tall claims of bringing 1 million new traders into the tax net have effectively flat lined.
The amount the government earned with 128 income tax returns is considerably less than what it has so far spent on an aggressive media campaign and reaching out to traders in various cities.
The Parliament had approved the tax amnesty scheme, officially dubbed as the ‘Voluntary Tax Compliance Scheme’, which came into effect on February 1 and will close on Monday.
Until Thursday afternoon, only 128 people filed income tax returns and paid Rs20 million in taxes, according to officials of the Federal Board of Revenue. Mainly people from Multan, Bahawalpur, Sialkot, Karachi and Lahore availed the scheme.
The government offered the traders to legalise up to Rs50 million worth of hidden working capital by paying 1% of the declared amount in tax.
Extension on the cards
Due to embarrassing results, the government is now contemplating giving at least a 15-day extension in filing tax returns, said officials. However, some voices in the FBR do not want to give the extension, as they know results would not be different. According to them, if the extension is necessary, the government should immediately restore the original 0.6% withholding tax on all banking transactions above Rs50, 000 by the non-filers to force them to avail the opportunity.
The government had levied the 0.6% tax in the current fiscal year’s budget, which became the base for giving the amnesty scheme. Later on, it reduced the rate to 0.3%.
While announcing the scheme at Prime Minister’s office, Finance Minister Ishaq Dar had claimed that within one month the FBR would bring in one million more people in the tax net, doubling the existing dismal figure of about one million income tax return filers.
Dar seemingly fell victim to claims of so-called representatives of the traders who promised that out of 2.8 million traders at least one million would avail the opportunity.
“The government gave whatever was demanded by the traders in order to resolve their concerns about coming into the tax net”, said Dr Mohammad Iqbal, spokesman of the FBR.
He said the FBR was still expecting that the number would significantly go up in the next couple of days. Dr Iqbal said that the FBR does not have anything to lose, as traders will have to come in the tax net at the end of the day.
Bone of contention among traders
However, sources said that the government did not negotiate with all the representatives of the traders. A big section of the traders, the Khalid Pervez Group, which is backed by the government of Punjab, boycotted the scheme, they added. The government expected that the Naeem Mir Group would deliver but it failed.
“The lawyers and political parties are campaigning against the scheme,” claimed Ajmal Baloch, the President of All Pakistan Anjuman Tajraan who brokered the scheme with the government. He demanded that the deadline should be extended till June 30.
It was clear from day one that the scheme would be a big failure and the FBR would never be able to increase the amount of filers by one million, said officials.
It was the second scheme that the Prime Minister Sharif offered in last two years. Both met with the same fate. In November 2013, the premier offered industrialists an amnesty scheme to legalise their black money up to Rs10 million in the name of increasing investment and broadening the tax base. However, neither the tax base expanded nor did investment pick up.
