“There is no deadlock with any trade associations,” the chairman of the Federal Board of Revenue, Shabbar Zaidi, told a press conference on Friday.
The talks between the FBR and trade and industrialist unions were mainly focused on two main sticking points: the CNIC requirement and SRO 1125, Zaidi said. He was briefing the media about the state of the on-going negotiations.
The SRO 1125 is a law that deals with the zero-rating tax regime, whereby exporters pay zero tax but claim refunds from the government on certain items that are part of their costs. The CNIC condition, on the other hand, is a sales tax law. It requires traders who purchase supplies or make sales of Rs50,000 or more to produce their CNICs while making the transaction so they can be registered with the FBR and brought into the tax net.
The FBR is facing a lot of resistance from traders for imposing the CNIC condition, which is aimed at increasing the tax net. “This law doesn’t affect the general public (aam admi),” Zaidi said.
The CNIC condition for traders is part of a larger campaign to fight tax evasion because the government is running a massive budget deficit (more than Rs3,000 billion) because of a low tax revenue.
There are about 381,000 trading units that fall in the sales tax jurisdiction, but only 47,000 of them are registered. Worse still, of the registered trading businesses, only 17,000 pay sales tax to the government. The government wants to change that equation by bringing more traders into the tax net.
The FBR can introduce a fixed rate scheme for small traders, but how should they define a small trader, the chairman said. He then went on to give an example: a goldsmith operating from a tiny shop can’t be compared to a blacksmith with a large workshop.
The chairman said there is no deadlock with any group or association of traders or industrialists but there is resistance because people don’t want to come into the tax net. He added, however, that they will consider suggestions from traders while finalizing the policy for them.
By the time this report went online, traders were adamant about going on a nationwide shutter-down strike from July 13.