FBR's Retail Tax Scheme Struggles as Only 220 New Shopkeepers Enroll

The Federal Board of Revenue (FBR) has registered only 220 new shopkeepers under its simplified tax scheme for retailers, a fraction of the 3.6 million potential non-filers identified in the sector. According to official sources, a total of 1,750 retailers have filed tax returns under the fixed tax regime, with just 220 being new entrants.

The scheme, designed to broaden the tax base and generate Rs. 50 billion from the retail sector, has thus far failed to attract significant participation. Earlier reports indicated that only 91 new retailers had joined by early October, highlighting the slow uptake.

To boost compliance, the FBR plans to geo-tag markets nationwide, building on its mapping of shops and markets. Non-registered shopkeepers face escalating penalties: Rs. 10,000 for the first month, Rs. 25,000 for the second, and Rs. 50,000 for the third. Authorities can also seal shops of those who remain outside the tax net.

The weak response comes as the FBR grapples with revenue shortfalls. In the first 30 days of October, it collected Rs. 975 billion against a target of Rs. 1,132 billion, a gap of Rs. 157 billion. For July to October, collections totaled Rs. 4,058.5 billion versus a target of Rs. 4,185 billion, missing by Rs. 126.5 billion.

Meanwhile, the deadline for income tax returns was extended twice this year, and by October, the FBR had received 7.6 million returns. The retail scheme's underperformance underscores the challenges in documentation and enforcement facing the tax authority.