IMF Proposes Asset Based Tax on Traders

The International Monetary Fund has urged Pakistan to introduce a new asset-based tax scheme targeting traders who remain outside the tax net despite several earlier attempts to bring them into the formal system.

According to Express Tribune, the proposal came after previous initiatives, including the Tajir Dost Scheme and retail sector-based tax targets, failed to deliver meaningful results.

The IMF’s proposal suggests taxing traders based on their assets rather than the size or location of their shops. However, officials at the Federal Board of Revenue argued that assessing traders’ assets would be difficult because most of them do not file tax returns.

Over the past three years, the government has launched multiple schemes to tax retailers, including a fixed tax collected through electricity bills during the PDM government.

That plan was withdrawn after political pressure. Later, the current government introduced a new traders’ scheme aimed at collecting Rs. 50 billion in the fiscal year 2024 to 25 through fixed monthly taxes ranging from Rs. 100 to Rs. 60,000 depending on the size of business premises.

The scheme was implemented in 42 cities but was later suspended after traders called for nationwide strikes in August 2024.

Tax officials believe strong political resistance and the street power of traders have made it difficult to bring them into the tax net. Authorities say measures such as point of sale systems and invoice digitisation are being used, but these steps alone may not be enough.

FBR data shows that traders paid only about Rs. 28 billion in withholding taxes during the first eight months of the current fiscal year, only Rs. 5 billion more than last year.

Including supply stage taxes, the combined collection under relevant provisions reached around Rs. 45 billion, far below the more than Rs. 350 billion paid by salaried individuals in the same period.

Meanwhile, the FBR is facing a widening revenue gap. Against a target of Rs. 14.13 trillion for the current fiscal year, the tax authority may fall short by Rs. 800 billion to Rs. 1 trillion. The shortfall during the first eight months has already crossed Rs. 640 billion, prompting the FBR to seek a reduction in the annual target to about Rs. 13.5 trillion