A tax scheme designed to bring the undocumented shopkeepers into the formal economy is on the verge of collapse, having attracted just two new taxpayers while falling more than 99 percent short of its annual revenue target.
The one percent fixed tax scheme, launched for small retailers this fiscal year, has collected only Rs26 million against a target of Rs50 billion, according to data reviewed by the Finance Ministry. Of the 317 shopkeepers who signed up, all but two were already registered taxpayers.
With the September 30 filing deadline just days away, the government has begun reconsidering the terms of the scheme in an effort to salvage it.
State Minister for Finance Bilal Azhar Kayani reviewed the performance on Tuesday amid growing debate within the ministry over its design and viability. Officials said only two genuinely new filers had emerged so far, one in Quetta and one in Rawalpindi, while 44 additional traders had prepared returns but had not yet submitted them.
The pattern repeats nationwide. Rawalpindi drew the highest enrollment with 87 shopkeepers, followed by Lahore with 61, Sahiwal with 33, Sialkot with 25, Karachi with 24 and Islamabad with 23. In each city, however, new filers numbered only in the single digits or fewer, with the vast majority of participants simply traders who had already been paying tax under the existing system.
Broader enrollment figures tell the same story. Of 6,631 traders who drafted returns under the scheme, 6,587 were pre-existing filers, meaning the initiative has so far failed to draw in the large population of unregistered retailers it was designed to capture. On average, each participating trader has contributed just Rs81,944 in tax.
The scheme offers eligible retailers a flat one percent tax on annual sales in exchange for exemption from audits, relief from installing point-of-sale systems, and protection from acting as withholding tax agents. Businesses under the scheme are also shielded from visits by Federal Board of Revenue officials and are generally spared from audit altogether. Eligibility is limited to traders operating a single outlet with annual sales below Rs200 million over the preceding three years.
Facing the poor uptake, the Finance Ministry has decided to intensify its public awareness campaign. Kayani has instructed tax commissioners to work with local tax bar associations so that shopkeepers can file their returns with the help of lawyers of their choosing before the deadline.
