Federal Board of Revenue (FBR) Chairman Muhammad Aurangzeb said that a proposed fixed retailer tax scheme could become an amnesty for tax evaders.

The initiative represents a high-stakes attempt by the Pakistani government to broaden the tax base by bringing small-scale traders into the formal economy. However, the tension between simplifying compliance and preventing loopholes could determine whether the state actually increases its revenue or inadvertently shields wealthy evaders.

The government is currently promoting a simplified tax scheme designed to reduce the burden on small retailers. Under this proposal, eligible traders would pay a minimum annual tax of Rs25,000 [1]. To qualify for the scheme, a retailer's turnover must remain below a ceiling of Rs200 million [2]. The plan also includes an audit exemption for small traders to encourage registration.

While trader groups have expressed support for the measure, the FBR Chairman raised concerns regarding the potential for misuse. Aurangzeb said the scheme might be framed as an amnesty for those who have avoided taxes in the past [3]. This contradicts the government's stated goal of increasing transparency, and compliance among the merchant class [4].

Negotiations between government officials and trader representatives are ongoing to finalize the deal [4]. The primary objective is to create a predictable tax environment that replaces complex filing requirements with a fixed fee. Despite this, the FBR remains cautious that the low entry cost and lack of audits could discourage larger businesses from reporting their full income, effectively allowing them to hide behind the small-trader designation [3].

“The proposed fixed retailer tax scheme could become an amnesty for tax evaders.”

This conflict highlights a recurring struggle in Pakistan's fiscal policy: the balance between 'tax ease' and 'tax enforcement.' By lowering the barrier to entry with a low flat fee and audit exemptions, the government may successfully register thousands of new taxpayers. However, if the turnover ceiling is not strictly monitored, the scheme risks creating a legal shelter for mid-sized businesses to underreport earnings, potentially offsetting the gains made by broadening the tax base.