The Federal Board of Revenue (FBR) in Pakistan has devised a simplified scheme for taxing the estimated incomes of traders, retailers, and specified individuals as part of efforts to reduce the size of the informal economy.
The FBR projects that the new scheme could generate income tax revenue ranging from Rs400 billion to Rs500 billion. The details of the scheme were presented to the federal cabinet for endorsement. The scheme aims to calculate the estimated income of traders and retailers based on factors such as location, value, and rent of the shops. A mobile application called ‘Tajir Dost’ has been developed to facilitate the income calculation process. Under the proposal, the indicative income will be determined based on a rate of three times the rental value. The tax will be payable in 12 monthly installments, and individuals who file their tax returns before the first installment will be offered a 50% discount. The minimum tax can be adjusted based on self-declaration in the annual return, providing flexibility and encouraging timely tax filing.
At present, only 300,000 out of an estimated 3.5 million retailers are actively filing tax returns. The scheme aims to bring the remaining 3.2 million retailers, primarily located in major cities, into the tax net and expand the tax base and enhance revenue collection.
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