ISLAMABAD: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb Friday highlighted the government’s measures to expand the tax net, introduce a fixed tax scheme for small shopkeepers and bring transparency to the tax system, stating that comprehensive reforms are underway to place the economy on sustainable foundations.
Addressing a press conference on Friday alongside Minister of State for Finance Bilal Azhar Kayani, the finance minister said Pakistan is moving from economic stability to economic growth and strengthening national revenue is a critical need of the time. A new scheme is being introduced after consultations with traders and trade associations.
He stated that despite recent floods and the ongoing Middle East conflict, the government maintained buffers due to economic stability, enabling it to fund rescue and relief operations during the floods as well as import bills, particularly oil expenses, from its own resources without seeking financial assistance from anyone. He termed this a significant example of self-reliance.
The finance minister said the tax system is being advanced on fair, balanced and sustainable foundations, with the prime minister leading this reform process, while reforms continue to further improve and expand the tax system. He announced that an AI technology-based proposal related to the tax system would be presented in parliament next week.
He said the need is to broaden the tax net rather than increase tax rates, adding that the current tax burden on different segments of society is imbalanced, and efforts are being made to correct this. The government’s focus is on making the tax system more effective and transparent, bringing into the system those segments that have not been contributing their fair share. The segment of small shopkeepers, comprising approximately 3 to 4 million people, is also being brought into the system with facilitation and consultation.
Addressing the press conference, Minister of State for Finance Bilal Azhar Kayani said the fixed tax scheme for small shopkeepers is being introduced after complete consultation, incorporating suggestions from trader organisations and trade associations.
This facility will also be available to existing filers, provided their annual turnover in any of the last three years does not exceed Rs200 million, and they are paying at least the same amount of tax as in the previous year.
Bilal Azhar Kayani said that a one-page form has been introduced, on which shopkeepers will record their sales. Shopkeepers will be required to deposit a minimum of Rs25,000 in cash. If a shopkeeper’s turnover is higher, the tax will be calculated at one percent on that amount. This one percent will be a fixed tax. Any withholding tax already deducted will be adjustable within this scheme.
He clarified that the scheme is entirely voluntary — shopkeepers may choose to join it or remain in the traditional system. Those who join will be issued a special plate by the FBR bearing the shop’s name, NTN number and the words “Taxpayer with Conscience,” along with a QR code. The QR code will enable shop verification and make the inspection process transparent.
Under this scheme, enrolled shopkeepers will generally be exempt from audits, with action taken only in serious cases in consultation with trader organisations. Exemption from the POS system requirement will also be granted, and the status of withholding agent will cease.
He warned that shopkeepers who neither join this scheme nor file taxes will face monthly penalties of Rs10,000 for the first month, Rs25,000 for the second month and Rs50,000 for the third month.
Meanwhile, the head of Pakistan’s largest retail industry body has thrown his support behind the government’s newly announced Fixed Tax Scheme for small retailers, calling it a credible first step toward bringing millions of informal shopkeepers into the formal tax net.
In a statement, Pakistan Retail Business Council Chairman Ziad Bashir said that the scheme marks a decisive break from the approach that doomed its predecessor, the widely criticised Tajir Dost Scheme, which generated near-zero voluntary uptake despite repeated extensions and enforcement threats. He also cautioned that the new scheme’s success depends entirely on how it is implemented.
Pakistan has an estimated 3.5 million retail outlets. Fewer than 50,000 currently file a tax return. Bashir argued this gap is not the result of dishonesty among traders, but of a system that made formalisation costly and unpredictable. “The informal retail sector is informal because the cost of being formal has always outweighed the benefit,” he said.
On Tajir Dost, Bashir was blunt: the scheme failed because it asked traders to trust an institution that had historically treated them as adversaries. Enrolment was compelled rather than incentivised, deadlines were extended repeatedly and traders’ associations mounted sustained resistance.
The new Fixed Tax Scheme, he said, takes a different approach, offering a flat rate of one percent on turnover, a minimum annual payment of Rs25,000, no mandatory point-of-sale systems, no unannounced inspections and no automatic audit presumption for those who sign up. He described it as “a peace-of-mind offer” for shopkeepers who have long feared that entering the formal system would expose them to unpredictable tax demands.
Bashir added that the scheme sends an overdue signal that the government is serious about widening the tax net and that the burden will eventually be shared more equitably.
Despite his endorsement, he set out clear conditions for success: penalty provisions must be enforced consistently, genuine uptake must go well beyond any minimum threshold and building turnover visibility across millions of small outlets will require sustained institutional investment.
Meanwhile, Prime Minister Shehbaz Sharif has constituted an eight-member committee for establishment of commercial courts. The committee will prepare its draft for establishment of commercial courts in the country and present its report to the prime minister within 45 days.
According to notification issued by the PM House, Law Minister Azam Nazir Tarar will be the chairman of the committee. Attorney General Mansoor Usman, Federal Minister Bilal Azhar Kiyani, law secretary, lawyers Faisal Naqvi, Ali ul Mani, Zainab Janjua and Ibrahim Afridi too are part of the committee.
