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The government’s endeavour to bring in retailers with a favourable tax slab is appreciated. The intention is not only to ease complex accounting processes – as around three million retailers countrywide are currently untaxed – but also to bolster the exchequer with a decent turnover. The recent proposal introduces a voluntary income tax regime for small shopkeepers, offering them exemptions from audits, withholding taxes, and mandatory digital invoicing.
Traders should take this as a bonanza offer to become part of the formal economy. Individual retailers with an annual turnover of up to Rs200 million will have the option to pay an income tax equal to 1% of their gross turnover, or a minimum fixed tax of Rs25,000, even if taxes already deducted at source exceed their liability. This proposal offers a clear path forward; the FBR must ensure robust enforcement, and shopkeepers who evade compliance must be taken to task.
All previous efforts to bring wholesalers and retailers into the tax net were politically jaundiced. This has taken a toll on the economy, as major revenue earners were coddled at the expense of national development. It is ironic that the salaried class pays a staggering income tax of over Rs630 billion, whereas corporate entities, real estate, and traders thrive on the premise of their nuisance value. As Pakistan is supposed to meet a tax target of Rs15.264 trillion this fiscal – a 17.6% increase over the previous year – all these holy cows must finally face the knife.
Retailers are currently obligated to pay an 18% standard sales tax on consumer goods and a 1% income tax on their annual turnover. It is problematic that a segment constituting roughly 19% of the GDP contributes less than 3% of all collected direct taxes. Tax reforms are indispensable if the economy is to sustain itself. It is high time to do away with tax rebates, SROs, and subsidies, allowing performing sectors to combine their synergies to help the country make ends meet.
While encouraging retailers to pay a lump sum, the government has made a major concession by overlooking receipt digitisation. This must be treated as a one-time waiver only.