The federal government has decided to introduce a new fixed tax scheme for retailers in the upcoming budget, a move aimed at formally documenting Pakistan’s vast retail sector and expanding the tax base, sources in the Federal Board of Revenue said.
According to officials familiar with the proposal, the scheme will be implemented nationwide and is designed to simplify tax compliance for small and medium retailers who have remained outside the formal system for years.
The plan is part of broader revenue measures being finalised ahead of budget approval talks with the International Monetary Fund.
Sources said the proposal will be shared with the IMF next week as part of ongoing negotiations on fiscal reforms, where Pakistan has committed to widening the tax net rather than increasing the burden on existing taxpayers.
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Under the proposed framework, retailers with an annual business turnover of up to Rs200 million will be required to register with tax authorities and pay a fixed tax of one percent on their annual turnover.
Officials believe this simplified structure will reduce resistance from traders who often avoid registration due to complex filing procedures and fear of audits.
Unlike earlier retail tax initiatives, the new scheme does not use shop size, covered area, or location as a basis for taxation. Instead, turnover has been set as the sole criterion, a change policymakers believe will reduce disputes and make enforcement more transparent.
In a significant departure from past practices, the entire scheme has been drafted in Urdu. FBR officials said this decision was taken to ensure that small shopkeepers and traders can clearly understand their obligations without relying on consultants or middlemen.
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The government aims to register nearly three million retailers under the new system. Officials said tax rates and revenue targets will remain deliberately modest in the initial phase to encourage voluntary compliance and avoid backlash from trader bodies.
Policy planners believe that once retailers are documented and brought into the formal economy, future reforms such as digital invoicing, simplified sales tax integration, and access to formal financing can be introduced more effectively.
If approved, the fixed tax scheme will mark one of the most significant attempts in recent years to bring Pakistan’s retail sector into the documented economy without aggressive enforcement measures.
