Government Targets Two Million New Retail Taxpayers

The federal government has informed lawmakers that a proposed retail taxation framework is expected to bring approximately two million retailers into the documented economy and generate an estimated Rs50 billion in additional revenue, forming a key component of ongoing efforts to broaden Pakistan’s tax base.

During a meeting of the National Assembly of Pakistan Standing Committee on Finance, chaired by Syed Naveed Qamar, Bilal Azhar Kayani briefed members on the structure, implementation strategy, and expected outcomes of the proposed scheme aimed at documenting currently unregistered retailers.

The committee reviewed various aspects of the proposed framework, including retailer registration procedures, taxation mechanisms, compliance obligations, and enforcement provisions.

According to the state minister, more than 3.5 million retailers remain outside the formal tax system when measured against the number of commercial electricity connections nationwide. In contrast, only 660,792 retailers are presently registered with the tax authorities.

Kayani stated that the retail sector continues to represent one of the largest untapped segments of the economy and offers significant potential for the Federal Board of Revenue (FBR) to expand the taxpayer base and enhance revenue collection.

He informed the committee that if approximately 30% of currently undocumented retailers are successfully incorporated into the scheme, the tax system could gain more than one million additional registered taxpayers.

Under the proposed framework, retailers would be permitted to determine and declare their taxable income and corresponding tax liability directly through their income tax returns. The scheme also seeks to reduce compliance burdens on smaller traders by exempting them from mandatory point-of-sale integration and digital invoicing requirements.

To ensure compliance, the government has proposed a graduated penalty structure for retailers who fail to pay the applicable fixed tax.

Under the proposed enforcement mechanism, a defaulting retailer may be subject to a penalty of Rs10,000 during the first month of non-compliance, Rs25,000 during the second month, and Rs50,000 during the third month.

The minister further informed the committee that businesses continuing to remain non-compliant after repeated defaults could ultimately face closure under the proposed regulatory framework.

Separately, the government is developing a Faceless Assessment and Audit System intended to modernise tax administration and reduce direct interaction between taxpayers and tax officials.

According to officials, the digital system is designed to minimise discretionary decision-making, improve transparency, and reduce the potential for collusion or inappropriate arrangements between taxpayers and tax authorities.

Meanwhile, the Senate Standing Committee on Finance and Revenue, chaired by Saleem Mandviwalla, has completed its review of the Finance Bill 2026-27 and the Annual Budget Statement.

The committee examined a broad range of fiscal and economic policy measures, including taxation reforms, customs administration, digitisation initiatives, industrial competitiveness, export promotion, investment facilitation, tariff rationalisation, and revenue mobilisation proposals.

The proposed retail taxation framework represents a significant component of the government’s broader strategy to increase documentation of economic activity, strengthen tax compliance, and improve revenue generation while simplifying tax administration through digital transformation initiatives.