Checking potential of VAT on retail stores

THIS is in response to M. Azam Shaikh’s letter ‘Overhauling the taxation system’ (Feb 13). Since it is now clear that our parliamentarians will never agree to impose tax on agricultural income, the government should tap the immense potential of value-added tax on retail stores.
For a start, two per cent VAT should be imposed and, as an incentive, those retailers who agree to recover and pay the tax to the government can be given suitable incentives (like a small percentage of the amount recovered by them).
Better still, numbered prize coupons can be given to customers who buy from registered outlets. A draw should be held every week and those coupons with the winning numbers can be awarded prizes (this system is in vogue in Turkey, Taiwan and some states of India).
Another lucrative source of revenue are the ‘bara’ markets in all cities of the country which sell smuggled goods. A two per cent sales tax can be imposed on shops in Karkhano Bazaar of Peshawar (with its more than 10,000 shops) and other markets like Gul Plaza in Karachi. A sum of Rs500 million can be recovered from this source alone.

DAWN, 16th February 2011