Islamabad: The government is seeking legal authority for Federal Board of Revenue (FBR) agents to instantly seal business locations that refuse to integrate in real-time after threats of hefty fines and utility service termination failed to sway people’s views.
Despite the severe methods at their fingertips, the FBR sought new punitive powers through the Supplementary Finance Bill 2021 after only 2,500 merchants integrated over 15,000 computers – known as point of sales (POS) – with the tax system. A supplementary bill to impose roughly Rs400 billion in new taxes will be submitted in parliament soon.
ACCORDING TO REVENUE BOARD SOURCES, the FBR has asked for authorities to close a business instantly. This is in contrast to the present provision of sealing commercial premises after imposing a fourth penalty of Rs3 million. According to the plan, any official of the Inland Revenue Service will seal business premises.
The most important government endeavor is the integration of POS with the FBR’s online system to know real-time sales of firms; thus, there is a need to establish a comprehensive deterrent, according to an FBR official, while outlining the background of requesting new legal authorities. According to the current law, if a person fails to integrate his business, he would be fined Rs500,000 for the first default and Rs1 million for the second default after 15 days.
If the person refuses to connect to the FBR’s system, he would be charged a penalty of Rs2 million on the third default after 15 days and Rs3 million on the fourth default. His business premises will be sealed after the fourth default until he integrates his business.
The FBR also has the authority to order any individual or group of individuals to integrate their invoice-issuing machinery with the FBR’s computerized system for real-time sales reporting. In his budget statement, the finance minister Shaukat Tarin said that the POS base would be increased to 500,000, generating billions of rupees for the government.
In addition, the government told the International Monetary Fund that the POS initiative would bring in Rs50 billion in revenue this fiscal year. However, the outcomes are, to put it mildly, underwhelming. According to sources, just 2,606 enterprises have registered with the FBR so far, with roughly 2,500 of them connected to the tax system.
Around 15,000 machines have been integrated with the tax system, up from around 11,000 at the start of the current fiscal year. The FBR wants access to POS, computerized registers, and card-reader terminals to perform sales transactions to prevent under-invoicing sales.
In September this year, the government imposed an Rs1 per invoice fee to raise funds for a lottery plan to promote the POS system and increased fines by 300 percent on individuals and enterprises who did not connect with the online tax system. The FBR also has the authority to cut off gas and electricity to anyone required by the Sales Tax Act to integrate their outlets with the FBR. However, all of these punitive measures have failed to improve the country’s POS integrated network.
IN JUNE, the FBR told then-finance minister Shaukat Tarin that plugging in 500,000 POS and bringing in Rs50 billion in the current fiscal year would be unfeasible. Various commercial banks operate roughly 65,000 point-of-sale devices, and the government had intended that at least these machines would be connected to the system in the current fiscal year. Although Tarin is a banker, even banks are not listening to the government.
According to the FBR official, POS should not be viewed as a revenue measure but rather as a tool for documenting the economy. Even though the FBR denied 60% of refund claims to tier-I retailers who refused to integrate with the tax system, businessmen have shown a clear hesitation to do so.