ISLAMABAD: The Federal Board of Revenue (FBR) is empowered to introduce prize schemes on invoices issued by retailers under Section 56C of the Sales Tax Act, 1990.
This initiative aims to incentivize the general public to make transactions exclusively with registered retailers who issue tax invoices.
The Sales Tax Act, 1990, which governs taxation on the sale and supply of goods and services in Pakistan, has been updated up to June 30, 2021, incorporating amendments through the Finance Act, 2021.
Section 56C of the Sales Tax Act, 1990, outlines the authority vested in the Federal Board of Revenue to design and implement prize schemes with the primary goal of promoting a tax-compliant culture. The incentive is tied to encouraging individuals to choose registered businesses for their purchases, further contributing to the formalization of the economy.
Section 56C – Prize Schemes to Promote Tax Culture:
1. Introduction of Prize Schemes
The Board, referring to the FBR, is authorized to prescribe prize schemes aimed at motivating the general public to opt for registered businesses that issue tax invoices. By introducing such schemes, the FBR seeks to create awareness and enthusiasm around choosing tax-compliant businesses, thereby bolstering the government’s efforts to broaden the tax base.
2. Mystery Shopping Procedure
Under this section, the Board is also empowered to establish a procedure for “mystery shopping” concerning invoices issued by tier-1 retailers integrated with the FBR online system. The concept of mystery shopping involves undercover assessments, where individuals, known as mystery shoppers, evaluate the compliance of businesses by posing as regular customers.
3. Ensuring Compliance
In case of any discrepancies identified through the mystery shopping process, all relevant provisions of the Sales Tax Act, 1990, will be applied accordingly. This ensures that businesses adhere to tax regulations, and any non-compliance is addressed promptly.
The introduction of prize schemes is a strategic move by the FBR to engage the public in the taxation process actively. By linking incentives to tax compliance, the FBR aims to create a positive environment that encourages individuals to contribute to the formal economy.
Potential Impacts:
1. Increased Tax Compliance
Prize schemes are anticipated to boost tax compliance as businesses strive to participate and individuals are motivated to choose registered retailers.
2. Public Awareness
The initiative will likely increase public awareness regarding the importance of dealing with registered businesses, contributing to the overall economic formalization.
3. Enhanced Monitoring
The integration of mystery shopping procedures adds a layer of transparency and accountability to the taxation system. It allows for real-time assessments of tier-1 retailers’ compliance with tax invoicing regulations.
Section 56C of the Sales Tax Act, 1990, represents a forward-looking approach by the FBR to foster a tax-compliant culture through innovative and incentive-driven strategies. As the prize schemes are introduced, their impact on tax compliance and public behavior will be closely monitored to assess the success of this initiative in promoting a robust tax culture in Pakistan.
