Amid the disappointing performance of the Tajir Dost Scheme, which registered only 44,830 retailers, the Federal Board of Revenue (FBR) is exploring options to introduce a simplified fixed tax scheme based on shop valuations to incorporate 3.6 million retailers into the tax net.
For over three decades, since the 1990s, efforts to bring retailers into the tax net have consistently failed. There is a pressing need for a novel approach, as another conventional scheme is likely to meet the same fate.
“We are considering various options to bring 3.6 million retailers into the tax net,” top FBR officials confirmed to The News on Friday. “This time, the FBR plans to introduce different tax slabs based on shop valuations, potentially implementing a fixed tax to attract retailers.”
The valuation of properties is currently underway in major cities and towns and is expected to be notified within the ongoing month. The FBR plans to use these valuations to introduce a fixed slab-based scheme for retailers.
“Different features of the fixed scheme for retailers are under study and will be launched soon, probably next week,” said an official.
The Tajir Dost Scheme, launched voluntarily in six selected cities with a deadline of April 30, 2024, saw only 78 retailers register initially. Despite involving trader leader Naeem Mir and continuing the registration drive, only 44,830 retailers have registered out of the over 3 million retailers nationwide.
The power wielded by retailers has historically forced ruling elites and the FBR to take stern actions against them. Previous attempts to collect taxes through electricity bills and shop sizes have all failed. Similarly, the installation of Point of Sale (POS) machines in branded shops failed due to inadequate technology, an ineffective operational framework, and a fragmented approach within the FBR.
Top FBR officials argue that there is no cohesive vision for documenting the economy in Pakistan. No effective mechanism exists for the registration of retail shops, and the FBR lacks an assigned workforce to ensure registration and taxation.
In response, the FBR has decided to launch a fixed scheme for retailers next week. The proposed scheme envisions charging a nominal amount of Rs12,000 annually, based on Rs1,000 per month, with a simplified form for retailers to complete.
The government has informed the IMF that, to facilitate sustainable medium-term adjustments, it will focus on mobilizing significant additional revenue through policy reforms to broaden the tax base, especially in under-taxed sectors; enhancing revenue administration; and incentivizing greater and more balanced fiscal efforts by the provinces. Enforcing income tax returns and collecting due minimum advance income tax will begin on July 1, 2024.
