Doomed tax initiative

THE FBR’s draft simplified tax regime for small shopkeepers is the latest in a long line of attempts to persuade Pakistan’s vast retail sector to enter the tax net. By offering a turnover-based tax of just 1pc, exemptions from routine audits, withholding tax obligations and mandatory digital invoicing, the government hopes to make compliance more attractive. Yet there is little reason to believe this initiative will succeed where countless others have failed. Pakistan’s retail sector has remained one of the country’s largest untaxed or undertaxed segments despite repeated experiments under both military and civilian governments. Successive administrations have introduced fixed tax schemes, presumptive taxes, negotiated settlements and voluntary arrangements, each promising to broaden the tax base without provoking confrontation with traders. The outcome has been remarkably consistent: negligible compliance.