Govt plans simplified tax system for small traders in 2026-27 budget

LAHORE – The federal government decided to introduce a simplified or fixed tax regime for small traders and shopkeepers in the upcoming 2026-27 budget, the sources said on Monday. The move, they said, is aimed at expanding the tax base and improving revenue collection by bringing more retail businesses into the formal economy. According to official budget documents, the proposed scheme will apply to traders with an annual turnover of up to Rs200 million. The authorities expect the initiative to generate around Rs50 billion in additional revenue by encouraging wider registration of small businesses. However, tax experts and former officials have expressed reservations over the likely effectiveness of the plan, pointing to past failures of similar schemes and structural weaknesses in retail sector taxation. Former Federal Board of Revenue (FBR) member Mustafa Ashraf said the proposal was a constructive step in principle but questioned its design and enforcement capacity. He noted that if even one million of the estimated four million taxpayers paid Rs25,000 annually, the revenue would be around Rs25 billion, but similar initiatives in the past did not deliver expected results. For the fiscal year 2026-27, the FBR has been assigned a tax collection target of Rs15.26 trillion, with the retail sector identified as a key area for improving compliance and widening the tax net. Economists say that despite its large share in the economy, the retail sector contributes relatively little to overall tax revenue. Official estimates suggest Pakistan has between 3.5 and 4 million traders, many of whom remain outside the documented tax system. Over the years, successive governments have introduced various fixed tax and trader-friendly schemes, but most have failed to significantly increase registration or revenue. A similar initiative launched in 2014 during the Pakistan Muslim League-Nawaz (PML-N) government, along with later programs such as trader facilitation schemes, also