In response to a widespread strike by traders across the country, the government has unveiled a new bilingual income tax return form designed to ease the tax filing process for traders. The Federal Board of Revenue (FBR) released a draft three-page form for the tax year 2024 and onwards, aimed at simplifying compliance for non-filers from the previous year. The form is open for finalization over the next seven days.
The newly proposed form retains 34 questions but focuses on generic information, omitting detailed asset disclosures that previously burdened traders. Notably, there is no requirement for traders to list their bank accounts, except for those related to potential tax refunds.
The move follows a significant shutter-down strike organized by the Central Organisation of Traders and the All Pakistan Anjuman-e-Tajiran, with backing from major religious political parties. The protest was against the government’s new taxation scheme, which, despite being perceived as lenient, was met with demands for its complete withdrawal.
The scheme, affecting dealers, distributors, retailers, and others in the supply chain across 42 cities, imposes a fixed tax ranging from Rs100 to Rs60,000 per month. Many traders fall into the lower tax bracket, but exceptions for small shops and makeshift vendors complicate the FBR’s ability to meet its revenue targets.
The new tax scheme’s impact is visible: the FBR has collected only Rs500,000 towards its Rs50 billion target for the fiscal year, with around 205 traders registered out of an estimated millions. The government’s earlier attempts to enforce tax compliance, including a door-to-door registration drive during Pervez Musharraf’s tenure, have previously failed.
In light of the strike’s success, the FBR is considering further concessions, such as reducing fixed tax rates and allowing quarterly tax payments. There are also discussions about delegating tax rate adjustments to field offices rather than centralizing decisions at the FBR headquarters. However, any changes will be subject to approval from the International Monetary Fund (IMF), which the government is cautious not to undermine.
The expanded scope of the scheme now includes shops in residential areas, a decision made discreetly. The updated income tax return form requires traders to report their total sales, purchases, expenses, and net profit, alongside other income sources. While detailed bank account information is not required, traders must disclose assets and any advance or adjustable income tax payments.
As the FBR finalizes the form, traders and the government await the results of ongoing negotiations, aiming to balance fiscal objectives with economic realities.
