The Pakistani government has introduced a nationwide fixed tax scheme requiring small retailers and traders to pay 1% of their sales [1].

This initiative aims to integrate a significant portion of the informal economy into the formal tax net. By offering simplified compliance, the Finance Ministry seeks to increase government revenue ahead of the upcoming federal budget.

Under the new regulations, small traders will pay a fixed rate of 1% on their total sales [1]. In exchange for this payment, the government will grant these businesses exemptions from traditional tax audits [2]. Additionally, participants in the scheme are exempt from reporting requirements regarding digital transactions [2].

The government expects the program to raise approximately Rs 50 billion annually [1]. The move is part of a broader strategy to expand the tax base across the country, a persistent challenge for the federal administration.

Officials said the scheme was announced June 5, 2026 [2]. The rollout is designed to reduce the administrative burden on small-scale entrepreneurs while ensuring a steady stream of revenue for the state [1].

“small traders will pay a fixed rate of 1% on their total sales”

This policy represents a shift toward a 'presumptive tax' model, where the government prioritizes consistent revenue collection over rigorous auditing of small businesses. By removing the friction of digital reporting and audits, Pakistan is attempting to incentivize voluntary compliance among a demographic that has historically avoided the tax net.