Retailers cold-shoulder Tajir Dost Scheme

ISLAMABAD: Against the agreed target with the IMF to fetch Rs25 billion by the end of December from retailers’ Tajir Dost Scheme (TDS), the tax machinery has received a very cold response and so far, collected a meager amount of just Rs1.3 million.

The FBR shared its transformation plan with the IMF on Monday and discussed the possibility for promulgation of an ordinance for taking stern action against potential non-filers in shape of freezing bank accounts, banning purchasing of plots and new vehicles. The expected ordinance is ready and will be promulgated after getting clearance from the IMF. “The FBR has also shared proposed changes in the TDS but the IMF has not so far given a response on it as it is the wish of the policymakers to make some changes in the TDS and target wholesalers and posh areas retailers.

Top official sources confirmed to The News that the TDS scheme for retailers has so far failed to achieve any substantial results as the number of registered retailers reached close to 80,000 but there were only 550 retailers who deposited money of around Rs1.3 million into the national kitty. Under the IMF agreement, it was envisaged that the FBR would collect Rs10 billion by September 30, 2024, and this amount would go up to Rs25 billion by December 30, 2024. For the whole financial year 2024-25, the IMF has fixed the target of fetching Rs50 billion through the retailers’ scheme.

The FBR also briefed the IMF team on the transformation plan under which the tax machinery was proposing stern actions against potential tax dodgers. With the help of data analytics and the use of technology, there are top one percent of potential filers who hide their genuine income and assets and the FBR might take action against them. It requires some legal changes so the government is planning to promulgate an ordinance for acquiring powers to go against tax dodgers with iron hand.

Top one percent wealthy/affluent class consists of almost 0.6 million who accumulated wealth but evaded tax massively. There are estimates showing they most wealthy people plunged into alleged tax evasion of Rs1.3 trillion on per annum basis.

The total tax gap identified by the FBR stood at Rs7.1 trillion on a per annum basis among all major taxes. The FBR has proposed legislation such as freezing of accounts, banning purchasing immovable property, and vehicles, and banning investing in stock markets against potential tax evaders.

The much-trumpeted transformation plan will be implemented in phases over period of three years with a total estimated cost of Rs137 billion. On the customs side, there is an element of smuggling and under-invoicing. The FBR proposed the establishment of state-of-the-art checkpoints at 24 bridges on the Indus River equipped with scanners and the latest technology to curb smuggling. The drone cameras will be installed for surveillance. The low-tech checkposts will be established in Balochistan to curb smuggling.

The FBR also proposed where income was more than Rs10 million, the common data-sharing mechanism would be developed along with SBP whereby the cash deposits/withdrawal limit would be restricted to Rs30 million per year where explainable income did not match with the transactions.

Among Income Tax, the top 1 percent wealthy who earned on average Rs13.2 million, only paid Rs499 billion but under-filing/null filing caused losses of Rs1300 billion. Top earners from 1 to 5 percent on average earned Rs2.7 million and FBR estimated they evaded taxes of Rs378 billion. Through under-filing, they showed decreased income and paid less taxes than the actual taxable amount.