The Federal Board of Revenue (FBR) in Pakistan is gearing up to implement a new tax scheme targeting retailers in five major cities, namely Karachi, Islamabad, Lahore, Peshawar, and Quetta. The proposed tax is structured to be based on both the size of the shop and its annual income, with monthly collections planned. This initiative aims to contribute significantly to the national exchequer, with a target of adding Rs100 billion.
Under the proposed scheme, retailers would be subject to a 10% advance tax on their annual income. This tax is intended to cover businesspersons across various sectors within the retail industry. The FBR’s decision to tailor the tax according to shop size and income is a strategic move to ensure a fair and progressive taxation system, acknowledging the diversity in the retail landscape.
The scheme is currently awaiting government approval before its official launch. The FBR’s expectation is that this initiative will bolster government revenues and contribute to addressing fiscal challenges. However, the success of the scheme is contingent on effective implementation and compliance from retailers.
This tax scheme comes in the wake of the International Monetary Fund (IMF) rejecting a fixed scheme for retailers, highlighting the need for a more nuanced approach. By opting for a system based on shop size and annual income, the FBR aims to strike a balance between generating revenue and accommodating the diverse nature of retail businesses.
It’s essential for the government to communicate the rationale behind this taxation strategy to garner support and cooperation from retailers. Striking a balance between taxation and fostering a conducive environment for business growth will be crucial in ensuring the success and acceptance of the proposed tax scheme.
