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Islamabad Launches Innovative Tax Scheme for Retailers

Islamabad Launches Innovative Tax Scheme for Retailers

ISLAMABAD: In a significant move to broaden the tax base, the federal and provincial governments are set to unveil the “Tajir Doost” scheme this month. This innovative fixed income tax initiative aims to streamline the registration of retailers, shopkeepers, and professionals across major cities, offering a substantial incentive of a 50 percent tax reduction for those who voluntarily comply.

The scheme emerges as a critical component of the Federal Board of Revenue’s (FBR) drive to document the economy more effectively. Despite an estimated 3.5 million potential retailers, currently, only 300,000 are actively filing tax returns. The Tajir Doost program is set to target the remaining 3.2 million, encouraging their registration and compliance.

Under this scheme, registration will be mandatory for all professionals and retail-level business operators. Utilizing a user-friendly mobile app, retailers will input essential information like shop size and electricity meter details to facilitate their registration with the FBR. The app will also play a pivotal role in calculating indicative taxes based on property valuations and shop rental values, with the tax payable in convenient monthly installments.

This move is not just about revenue generation; it’s a strategic step towards a more documented and transparent economy. The FBR is also planning an extensive door-to-door campaign in the four provincial capitals and Islamabad starting January 2024, targeting non-filing retailers.

A key aspect of the scheme is the integration of electricity meter data to identify potential tax evasion and conduct necessary audits. To ensure fairness and accuracy, the FBR will conduct random audits of assessments filed under the scheme. This will not only verify the correctness of valuations and payments but also minimize the scope for discretionary alterations by field offices.

In a bid to prevent double taxation, monthly advance tax payments will be offset against the final income tax liabilities at the year’s end. However, the FBR has clarified that no refunds will be issued for these advance tax payments.

This initiative marks a significant step towards expanding Pakistan’s tax base and enhancing the documentation of its economy. With its focus on ease of compliance and incentivizing voluntary participation, the Tajir Doost scheme could pave the way for a more efficient and equitable tax system.