FBR dead set on netting undocumented SMEs: Zaidi

ISLAMABAD: Chairman Federal Board of Revenue (FBR) Shabbar Zaidi on Tuesday said the small and medium enterprises (SMEs), unwilling to become a part of tax system, would be brought into the net through the recently launched documentation drive.

“The future of those is shining who will prefer to come into tax system while future of those is dark who will not become part of documentation drive,” said Zaidi addressing Innovative Finance Forum organised by the Asian Development Bank (ADB) in collaboration with Karandaaz Pakistan and Gates & Melinda Foundation.

He also said the government’s attention was centred on promoting economic activities as their slowdown could create problems for achieving the desired tax collection target.

Admitting that due to a trust gap between SMEs and taxpersons, the country was lagging behind in promotion of tax culture, Zaidi said it was also a fact the businesses were growing but the balance sheet and wealth statements continued to remain stagnant.

He said under the government’s documentation drive, availing utilities including electricity, gas, and even acquisition of industrial plots would become impossible for those choosing to stay out of the tax system.

“Only those SMEs can achieve progress that will come into tax system.” He said there were 3.1 million electricity connections of industrial and commercial consumers out of which only 43,000 were registered into General Sales Tax (GST) regime. “Most of them unregistered belonged to the SME sector,” the FBR chairman added.

Zaidi added that the undocumented entities would not be able to get access to credit from banking sector. The element of harassment on part of regulatory functionaries, including from the FBR, was one of the main reasons widening the existing trust gap with SMEs, discouraging them from coming into the tax net, he maintained.

The FBR chairman said the trade sector was incentivised, while manufacturing remained at a disadvantaged position. “Tax amnesty schemes were introduced to provide an opportunity to the SME sector to come into the tax net by availing them and those that knew about its positive outcome reaped the benefits of incentives.”

The FBR was going to come up with separate tax laws for dealing with the SME sector to make registration into the tax system simple and easy, Zaidi said, adding, the existing laws were too complex for them to comprehend in detail.

He said the government would simplify all tax laws related to income tax, sales tax, federal excise duty, as well as customs duty. The FBR chairman concluded that the documentation drive could prove a key to giving the tax revenues of the country a needed boost.