Islamabad: In a significant move aimed at simplifying tax collection and broadening the tax net, the Federal Board of Revenue (FBR) is contemplating the introduction of a fixed tax system for retailers across Pakistan. This new tax system, if implemented, could affect approximately 3.6 million retailers nationwide.
According to reports in The News, the FBR is actively working on a plan to replace the existing tax collection method for small traders and shopkeepers, which involves collecting taxes through electricity bills. Instead, they are exploring the possibility of implementing new fixed tax schemes for both urban and rural areas.
Under the proposed scheme, retailers with shops measuring 100 square feet could be subject to a fixed monthly tax of Rs1,000. Those with larger shops ranging from 200 to 300 square feet might face a monthly tax of Rs3,000. For larger shops of 500 square feet in urban areas, a fixed monthly tax of Rs5,000 is under consideration. In rural areas outside municipal committee jurisdictions, a flat rate of Rs1,000 per shop is being contemplated.
To provide flexibility to retailers, the proposed system would allow them to include the paid tax in their following year’s tax return filing. The process is expected to be straightforward, with a one-page form available for retailers to avail of this fixed tax scheme.
Responding to queries about the proposed scheme, the Chairman of FBR emphasized that no final decision has been reached yet. Once the proposal is formalized by the FBR, it will be presented to the finance minister for consideration.
It’s worth noting that if approved, the caretaker government would not require new legislation or wait for new assemblies to enact amendments, as the FBR possesses the authority under existing parliamentary-approved laws to introduce such schemes for retailers.
However, there remains uncertainty regarding the public response to this initiative. Past efforts to bring retailers into the tax net have encountered significant opposition. For example, previous attempts to collect taxes through electricity bills faced strong resistance, ultimately leading to its withdrawal following concerns raised by traders.
The success of this new proposal will depend on the caretaker government’s ability to navigate pressure from shopkeepers and effectively implement its plans to expand tax collection across various sectors. The outcome will be closely watched as Pakistan seeks to streamline its tax collection system and boost revenue for essential public services.
