Mohsin Siddiqui (Chief Reporter)

The Federal Board of Revenue (FBR) is currently considering a new proposal from traders that could significantly alter the method of advance tax collection. This proposal suggests collecting taxes based on the category of businesses in the market, a system that traders believe would be more efficient and manageable compared to the existing method of conducting door-to-door surveys.

Traders, who have long been advocating for changes to the tax collection process, are pushing for the adoption of an annual tax payment system. However, under the current rules, they are required to pay advance tax on a quarterly basis, with the first installment for the fiscal year 2024-25 due in October 2024. This has prompted discussions about finding a middle ground that satisfies both the FBR’s requirements and the traders’ needs.

The primary motivation behind the traders’ proposal is to streamline the process of tax collection. Traders argue that categorizing businesses and collecting tax based on these categories would be far more efficient than conducting individual surveys of shops and markets. Such surveys, they contend, are not only time-consuming but also prone to inconsistencies.

One of the proposals under consideration is to classify businesses into major categories and then impose a fixed advance tax for each category. This method, according to traders, would simplify the process for both parties, as it would allow the FBR to collect taxes more systematically while traders would have a clearer understanding of their tax obligations based on their business category.

The FBR is reportedly working to define these categories and ensure that the category-wise advance tax is fair and reasonable for all types of businesses. Additionally, business-wise shops will be categorized to ensure accurate and appropriate tax collection.

Another key aspect of the ongoing discussions is the potential shift from the current monthly fixed tax payment mechanism to a quarterly tax payment system. This would require amendments to the FBR’s current notification regarding tax collection, but traders have expressed openness to this change as it could reduce the burden of making monthly payments.

The idea behind the proposed quarterly tax payment system is to offer more flexibility to traders, giving them time to manage their finances and pay taxes in larger, less frequent installments. The transition to quarterly payments could also simplify accounting processes for businesses, allowing them to plan for tax payments in a more organized manner.

Speaking to the media, Chief Coordinator of the Tajir Dost Scheme, Naeem Mir, emphasized that the most pressing issue at hand is finalizing a mechanism for tax collection that works for both traders and the FBR. He noted that traders want a system that is not only transparent and straightforward but also one that is agreeable to both sides.

Mir highlighted the fact that traders have been advocating for the option to deposit advance tax on an annual basis. However, this option has been deemed difficult for many traders to manage, as paying a lump sum amount in a single transaction could create financial strain. Traders are therefore pushing for a system where the tax burden is spread out over the year.

“The mechanism should be acceptable both to the FBR as well as traders,” Mir explained, adding that the amount of tax to be paid on a quarterly basis would be determined during the ongoing discussions. He also noted that the tax amount would be adjustable, meaning that traders could account for it when filing their annual tax returns.

Another key issue that traders have raised is the upper slab of the fixed tax, which currently stands at Rs 60,000. Traders argue that this amount is too high for many small and medium-sized businesses and have requested that it be reduced to a more reasonable level.

In response to these concerns, the FBR has agreed to consider reducing the upper tax slab to a more manageable figure. This adjustment would help alleviate the financial burden on smaller traders while ensuring that the FBR continues to collect the necessary revenue.

The discussions between the FBR and traders are ongoing, with both sides convening regular meetings to resolve outstanding issues related to tax payments. The FBR has expressed its willingness to consider all genuine demands from traders, including potential amendments to the Tajir Dost Scheme, which governs tax collection from traders.

Naeem Mir affirmed that the FBR is committed to working with traders to ensure that the tax system is fair, transparent, and efficient. He added that any necessary amendments to the Tajir Dost Scheme would be made to accommodate the concerns and needs of the trading community.