FBR Proposes Higher Withholding Tax on Non-Filer Traders After Low Tajir Dost Scheme Registration

The Federal Board of Revenue (FBR) in Pakistan has proposed increasing the withholding tax on supplies to non-filer wholesalers and traders after an unsuccessful voluntary registration drive for the Tajir Dost Scheme (TDS). The FBR had announced a registration drive under the TDS, offering incentives to traders and wholesalers to register voluntarily by the April 30 deadline, but less than 100 traders registered in the first month.

The FBR has now worked on a proposal to increase the withholding tax rate on manufacturer supplies to distributors who are not registered with TDS from 0.2% to 10%. The same 10% withholding tax will apply to importers' supplies across the supply chain. The FBR estimates this initiative will generate an additional Rs400 billion to Rs500 billion in revenue annually.

The FBR will also consider extending the deadline for voluntary registration and begin obligatory registration after the deadline. Non-compliance with registration will attract penalties.

The All Pakistan Association of Traders and Traders Action Committee Islamabad have blamed the FBR for the failure of the TDS, citing a lack of effective awareness campaigns and failure to address the business community's concerns. The trading community has demanded an extension of the registration period and better engagement from the FBR.

Why this matters: The low registration numbers for the Tajir Dost Scheme highlight the challenges in expanding Pakistan's tax base and formalizing the economy. The proposed higher withholding tax on non-filers could have significant implications for businesses and consumers if implemented.

Muhammad Naeem Mir, the chairman of the Supreme Council of All Pakistan Anjuman-e-Tajiran, has been appointed as the Chief Coordinator of the Tajir Dost Scheme-2024 to facilitate the registration of retailers and wholesalers across the country. "The FBR has tasked Mir to coordinate with trade bodies and facilitate the registration of retailers and wholesalers across the country," sources told Dawn.

Key Takeaways

• FBR proposes 10% withholding tax on supplies to non-filer wholesalers and traders.
• Less than 100 traders registered for the Tajir Dost Scheme in the first month.
• FBR estimates the initiative will generate Rs400-500 billion in additional revenue annually.
• Traders blame FBR for the failure of the Tajir Dost Scheme, citing lack of awareness and engagement.
• FBR appoints a Chief Coordinator to facilitate the registration of retailers and wholesalers.