Pakistan to Impose Stiff Penalties on Unregistered Retailers as Tax Scheme Falls Short
The government plans fines of up to Rs. 50,000 for shopkeepers who fail to register under the Easy Tax Scheme, as only a fraction of the 3.5 million potential taxpayers have signed up.
The Pakistani government is set to enforce penalties on retailers who have not registered under its Easy Tax Scheme, with fines escalating to Rs. 50,000 by the third month, Minister of State for Finance Bilal Azhar Kayani informed the National Assembly Standing Committee on Finance on Tuesday. The registration deadline expired on October 31, and while some retailers have enrolled, many remain outside the tax net.
Under the proposed penalty structure, unregistered retailers or those failing to file income tax returns would face fines of Rs. 10,000 in the first month, Rs. 25,000 in the second, and Rs. 50,000 in the third. Kayani noted that traders had agreed to these penalties during consultations when the scheme was designed, and the government accepted all major demands of the business community to encourage broader participation.
The government identified approximately 3.5 million shopkeepers using data from commercial electricity meters installed by power distribution companies (DISCOs). Despite this, the Easy Tax Scheme has attracted only 220 new traders, with around 1,750 shopkeepers registering in total—far below the Federal Board of Revenue's (FBR) target of bringing 200,000 to 500,000 retailers into the formal system and generating Rs. 50 billion in revenue.
Committee Chairman Syed Naveed Qamar questioned the scheme's effectiveness, recalling that the government had expected about 80 percent of retailers to register. He asked how enforcement would be carried out, and Kayani assured that a comprehensive enforcement plan would be presented within days. The minister acknowledged a culture of tax noncompliance in Pakistan, noting that many traders fear that registering with the FBR could lead to unnecessary scrutiny.
The FBR has identified around 3.6 million potential non-filers in the retail sector. The low registration numbers highlight the challenge of widening the tax base in a country where many businesses operate informally. The government hopes the penalty mechanism will incentivize compliance and bring more retailers into the formal economy.
