The FBR plans to tax retailers in big Pakistani cities, expecting to generate Rs 100 billion in revenue

The Federal Board of Revenue (FBR) in Pakistan is poised to roll out a novel tax initiative targeting retailers in five major cities – Karachi, Islamabad, Lahore, Peshawar, and Quetta. The proposed tax structure incorporates both the size of the shop and its annual income, with plans for monthly collections. The primary objective is to significantly contribute to the national exchequer, with a targeted addition of Rs100 billion.

Under this proposed scheme, retailers would be subject to a 10% advance tax on their annual income, encompassing businesspersons across diverse sectors within the retail industry. The FBR’s decision to tailor the tax according to both shop size and income reflects a strategic move towards establishing a fair and progressive taxation system that recognizes the varied nature of the retail landscape.

Awaiting government approval before its official launch, the scheme aims to fortify government revenues and address fiscal challenges. However, its success hinges on effective implementation and compliance from retailers.

This tax initiative follows the International Monetary Fund’s rejection of a fixed scheme for retailers, emphasizing the necessity for a more nuanced approach. By opting for a system based on shop size and annual income, the FBR seeks to strike a balance between revenue generation and accommodating the diverse nature of retail businesses.

Critical to the initiative’s success is the government’s communication of the rationale behind this taxation strategy, garnering support and cooperation from retailers. Maintaining equilibrium between taxation and fostering a business-friendly environment will be pivotal in ensuring the success and acceptance of the proposed tax scheme.

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