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ISLAMABAD: The Federal Tax Ombudsman (FTO) has advised the traders, retailers to voluntarily come forward to accept the national challenge of documentation and assist the Federal Board of Revenue (FBR) in devising a mechanism to document the economy.

A special report of FTO on retail sector revealed that the FBR needs to hold an exhausted pre-budget session with the stakeholders to reach out to common point of facilitation of taxpayer along with documentation of economy under automated environment without creating discrimination amongst different tiers of stakeholders.

Traders, retailers also need to come to the fore to accept this national challenge and assist state authorities in devising a mechanism to document the economy which equally serves public interest as well as interest of the taxpayer, FTO special report said.

After analysis of the complaints received by the FTO office during past seven months, and after due interactions of the Federal Tax Ombudsman with the office-bearers of various associations and Anjuman Tajran Pakistan,

recommendation to facilitate the integrated retailers or those not liable to be integrated was also discussed. Based on the FTO’s recommendations to address the anomalous situation and create a level playing field for all the retailers have been agreed upon the policy wing of the FBR may consider the same for the Budget (2022-23), the FTO said.

The report stated that Pakistan has around two million retailers, including kiryanas, general stores, supermarkets, hypermarkets etc; Chainstore Association of Pakistan is the largest trade body of organised retailers and represents over 200 of high-end retail businesses in the country.

Despite the huge size of the retail sector the total tax contribution from the sector has remained low. The reason behind this is that a considerable number of taxable transactions are made without any documentation and resultantly without any tax deduction. In order to enhance the effectiveness of the tax enforcement at retail stage, in many economies there have been precedents to monitor the retail sector through tracking the taxable transactions by recording the purchase invoices (a case is Brazil’s Nota Fiscal Paulista Programme) and third-party reporting ((Turkey’s prize scheme on retail invoices).

The FTO special report revealed that the expansion of the tax base in Pakistan is recognized as an essential policy goal to increase domestic sources to reduce foreign aid dependence. However the integration of businesses with point of sale (POS) is a big challenge for both the FBR and businesses alike for multiple reasons. First is the complexity of legal provisions for POS integration. Second, are glitches and delays in the automated system of the FBR.

Overall, the integration process is fraught with procedural delays and systemic limitations. It is yet to be analyzed whether the scheme has made a sizable contribution to raising the revenue and how successful is the process of monitoring the taxable activities through POS integration. It is recommended that while carrying on with the aim of more integration, the FBR should ensure a taxpayer friendly automated system removing the flaws pointed out in the study, and doing away with the discretion by more and speedy automation systemic improvement, the FTO report added.

Copyright Business Recorder, 2022

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