The Pakistan government launched a fixed tax scheme on Friday, June 5, 2026, imposing a 1% tax on small retailers and traders [1].
The initiative seeks to broaden the national tax base by integrating a massive segment of the informal economy into the formal system. By offering specific exemptions, the government hopes to reduce the tax burden on existing taxpayers while generating significant new revenue [4].
Under the new rules, the 1% tax applies to small retailers and traders with annual sales of up to Rs200 million [2]. In exchange for paying this fixed rate, participants are granted exemptions from tax audits and requirements to maintain digital transaction records [1].
Finance Minister Muhammad Aurangzeb and Minister of State Bilal Azhar Kayani said the scheme is a necessary step for revenue generation [4]. The government estimates the program will bring between 3.5 million and 4 million small traders into the tax net [5].
Officials said the goal is to raise approximately Rs50 billion annually through this specific mechanism [1]. The scheme presents traders with a choice between this relief-based system or facing potential penalties and audits from the Federal Board of Revenue [5].
This move follows a series of efforts by the administration to stabilize the economy through wider fiscal compliance. The government has signaled that expanding the tax net is inevitable to ensure sustainable revenue growth for the state [4].
“The government aims to bring 3.5 to 4 million small traders into the tax net.”
This policy represents a strategic shift toward 'formalizing' Pakistan's retail sector by trading regulatory leniency for consistent revenue. By removing the threat of audits and digital bookkeeping for those under the Rs200 million threshold, the government is attempting to lower the barrier to entry for millions of informal traders who previously avoided the tax system to escape bureaucratic scrutiny.
