By Rana Irfan Rafi
The Federal Board of Revenue (FBR) recently introduced the Tajir Dost Tax Scheme, aimed at incentivizing tax compliance among retailers. This initiative represents a significant milestone in Pakistan’s efforts to modernize tax administration and expand the tax base.A year ago, I wrote an article titled “Trade Policy and Tax Reform Policy,” which was published in newspapers. In the article, I highlighted the urgent need for tax reform. I pointed out the widespread issue of merchants avoiding taxes, especially due to weak enforcement and a lack of a proper database. I emphasized the importance of including everyone in the tax system and making sure tax policies are fair. I suggested three main ideas, including the importance of having accurate data for creating fair tax policies and making the trade sector more transparent.
The recent launch of the “Tajir Dost Tax Scheme” by the FBR is a clear indication of their commitment to reforming tax policies in line with the recommendations outlined in my article. This scheme, which aims to streamline taxation for retailers, reflects the importance of creating a systematic approach to tax collection and ensuring compliance among traders of all scales.
I extend my heartfelt appreciation to the media and newspapers for giving me the platform to voice my ideas and contribute to the discourse on tax reform. Additionally, I commend the FBR for their proactive approach to adopting innovative strategies to enhance revenue collection and promote fiscal responsibility.
Under the Tajir Dost Tax Scheme, retailers are provided with a simplified online registration process and offered incentives for timely tax payments. The scheme leverages technology to enhance taxpayer engagement and promote transparency in tax administration. By encouraging retailers to participate in the formal economy, the scheme aims to foster economic growth and reduce tax evasion.
While the Tajir Dost Tax Scheme marks a positive step towards tax reform, there are still challenges that have to be faced, i.e. Many retailers may be unaware of the scheme’s benefits or hesitant to participate due to a lack of understanding. Limited access to technology and digital literacy among retailers may hinder their ability to register and file taxes online. Ensuring compliance with the Tajir Dost Tax Scheme requires robust enforcement mechanisms and monitoring capabilities. Strengthening enforcement measures and imposing penalties for non-compliance can deter tax evasion and uphold the integrity of the scheme. Effective implementation of the scheme relies on accurate data management and analysis. Establishing reliable data collection processes and investing in data infrastructure are essential for maximizing the scheme’s impact and informing future tax policies.
I would like to highlight one more main sector in the tax net as well. The transport sector is a very huge sector in Pakistan and a very profitable sector. The transport sector plays a pivotal role in Pakistan’s economy, facilitating the movement of goods and people across the country. However, despite its significant contribution, the transport industry often operates in the informal economy, evading taxes and avoiding regulatory oversight. In order to promote fair taxation and bring the transport sector into the formal economy, it is essential to devise strategies to register transporters under initiatives such as the Tajir Dost Tax Scheme.
The transport sector in Pakistan faces several challenges when it comes to taxation. One of the major hurdles is the large number of unregistered transporters who operate without any formal documentation. This not only leads to revenue loss for the government but also creates unfair competition for registered transporters who comply with tax regulations. Additionally, the lack of a centralized database makes it difficult for authorities to track and monitor transport activities effectively.
To address these challenges and promote tax compliance in the transport sector, it is imperative to integrate transporters into the Tajir Dost Tax Scheme. This scheme, which aims to incentivize tax compliance among retailers, can be expanded to include transport operators. Here are some suggestions on how transporters can be registered under the scheme. Transport operators should be able to register online through a user-friendly portal, providing basic information such as vehicle details, routes operated, and contact information. To encourage participation, the registration process should be free of charge and require minimal documentation.
Transporters who voluntarily register under the Tajir Dost Tax Scheme should be offered incentives to encourage compliance. The scheme can motivate transport operators to formalize their operations and contribute to the tax base. A comprehensive public awareness campaign should be launched to educate transporters about the benefits of registering under the Tajir Dost Tax Scheme. This campaign can utilize various communication channels, such as social media, radio, television, and community outreach programs, to reach a wide audience.
Transport associations can play a crucial role in advocating for tax compliance among their members and providing support during the registration process. Government agencies should work closely with industry representatives to address any concerns and streamline administrative procedures.
The author is associated with SDPI (Sustainable Development Policy Institute) as project assistant and can be contacted at irfanrafi@sdpi.org tweeter@ransskt11
