The federal government on Friday introduced a fixed tax scheme for small shop owners as part of ongoing efforts to widen the tax net and document the economy.
In a joint press conference, Finance Minister Muhammad Aurangzeb and State Minister for Finance Bilal Azhar Kayani shared the key features and objectives of the latest scheme, acknowledging the demand to reduce tax rates rather than increase them in the upcoming budget.
Aurangzeb said an estimated three to four million small traders would be eligible for the latest initiative and welcomed their entry into the tax net. He said they had previously avoided the process due to apprehensions about the Federal Board of Revenue (FBR), but were now coming forward voluntarily.
According to the finance minister, all stakeholders want to play a part in shoring up the national economy. He emphasized that the new scheme’s implementation followed consultations and demands from small traders.
Detailing the salient features of the scheme, Kayani explained it applied to shopkeepers with annual sales of Rs. 200 million or less. He said the government was introducing the fixed tax framework to make it easier for small traders to fulfil their tax obligations. “This is a one-page form on which traders will record the sale of their goods,” he said, reiterating that this was in line with demands of traders’ associations.
The state minister said the scheme imposed a fixed tax rate of 1%, adjustable against any withholding tax already deducted. It requires eligible retailers to submit a simple one-page declaration form, available in Urdu, Pashto, Sindhi and Balochi languages, he added.
According to Kayani, all traders availing the scheme would be required to deposit a minimum of Rs. 25,000 when filing the form, irrespective of the amount of withholding tax already deducted. Businesses with higher turnover would pay tax at 1% according to their sales volume, he added.
He said both filers and non-filers could become part of the scheme by submitting the required form, but noted it was optional and shopkeepers wishing to remain under the prevailing tax system did not have to become part of the fixed tax regime. He further said participants in the scheme would generally be exempt from tax audits.
In exceptional cases, however, where an audit became necessary, it would follow consultation with, or intimation to, a notified committee comprising representatives of traders’ organizations.
Kayani said shopkeepers who neither joined the fixed tax scheme nor filed returns under the normal tax regime would face penalties of Rs. 10,000 in the first month, Rs. 25,000 in the second month and Rs. 50,000 in the third month. He also stressed that street vendors and pushcart operators remained exempt from the scheme.
The minister explained that traders seeking to benefit from the program must ensure their tax payment is at least equal to the previous year’s amount. He said traders enrolled in the scheme would receive a plate issued by the FBR they could display at their shop, which would exempt them from the tax body’s point of sale requirement. This, he said, would further simplify tax compliance for small businesses.
In a statement, Pakistan Retail Business Council Chairman Ziad Bashir welcomed the scheme but noted its success depended on how it was implemented. Describing the initiative as a “credible first step,” he said it could bring millions of informal shopkeepers into the formal tax net.