The International Monetary Fund (IMF) has proposed that Pakistan implement a new asset-based tax scheme targeting traders who remain outside the tax ambit. This recommendation comes amid the Pakistani government’s hesitance to tackle politically sensitive tax reforms.
According to sources from The Express Tribune, the IMF’s proposal follows unsuccessful attempts with previous schemes such as the Tajir Dost Scheme and retail-focused tax collection targets. However, the Federal Board of Revenue (FBR) has expressed reluctance, favoring the continuation of existing tax arrangements.
Unlike prior area-based schemes, the IMF suggests that traders be taxed under a new asset-based tax scheme. The FBR, however, argues that the majority of traders do not file tax returns, making it difficult to assess their assets or determine liabilities accurately. Despite several initiatives over the past three years, the government has struggled to bring traders into the tax net.
During the PDM-I era, a fixed income tax was imposed on retailers through electricity bills. This measure was retracted after intervention by a senior PML-N leader, now Chief Minister of Punjab. Under the current IMF program, the government aimed to collect Rs50 billion from traders in the fiscal year 2024-25, initially targeting commercial areas before expanding to residential shops.
The scheme set fixed income taxes ranging from Rs100 to Rs60,000 monthly, based on business premises size, and was announced for traders in 42 cities, including 25 in Punjab. However, following a strike by trade unions in August 2024, the government halted the scheme’s implementation.
Tax authorities cite a lack of political commitment and the traders’ strong street power as barriers to effective tax net expansion. They emphasize gradual integration through Point of Sale systems and invoice digitization, but these measures alone have not sufficed.
FBR data reveals that traders paid Rs28 billion in withholding taxes during the first eight months of the fiscal year, a mere Rs5 billion increase from the previous year. Additionally, Rs17 billion was collected at the supply stage, only Rs1 billion more than last year. Combined income tax under sections 236-G and 236-H totaled Rs45 billion, far below the Rs350 billion paid by salaried individuals.
Manufacturers’ failure to report retailer data further complicates the situation, leaving salaried individuals and manufacturers to shoulder an undue tax burden. Despite receiving resources like 1,000 cars and extra salaries, the FBR has struggled to broaden the tax net.
Following Prime Minister Shehbaz Sharif’s austerity measures, the FBR may need to return 600 cars. It’s uncertain if the practice of awarding extra salaries as performance incentives will continue after a 20% expenditure cut. The FBR’s tax target of Rs14.13 trillion for the current fiscal year may fall short by Rs800 billion to Rs1 trillion.
The FBR’s shortfall against the original target exceeds Rs640 billion, even after Rs125 billion in super tax recoveries. The FBR has requested the IMF to reduce its tax target to Rs13.5 trillion, approximately Rs630 billion less than initially planned.
Published in SouthAsianDesk, March 11, 2026
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