Islamabad:
The Prime Minister said Wednesday that the retail sector paid an additional income tax of RS455 billion in the last fiscal year, a surprising claim on the basis of information granted by the tax authorities.
In an official statement published by the Office of the Prime Minister, it was stated that “in the retail sector, tax collection increased by RS455 billion compared to the previous year, promoted by the integration of point of sale systems and a more strict application.”
The officials of the Federal Income Board (FBR) said that the total pay tax payments made by the retail sector in fiscal year 2024-25 were in fact RS617 billion and the Additional Income Tax was 455 billion rupees. They said that the RS617 billion collection included RS316 billion in quarterly advances granted by three categories, wholesalers, retailers, merchants and some companies.
The surprising RS316 billion in quarterly advances could be analyzed with critical lenses due to the highly informal nature of the sector. The FBR sources told The Express PAkGazette that a loose definition of the retail sector was used, which included some companies in the corporate sector.
The official statement added that Prime Minister Shehbaz Sharif presided over a review meeting on the current reforms in the FBR, praising the progress made so far while stressing the need for sustained and limited efforts to review the online tax system with modern requirements.
The sources said that during the meeting the discussions on the participation of the retail and manufacturing sectors and the contribution of record taxes of RS555 billion made by the wage class took place. Some of the participants were of the opinion that the manufacturing sector and salaried individuals were very overloaded compared to their contribution to the economy.
According to data from the Pakistan Statistics Office (PBS), the proportion of the manufacturing sector in the economy was only 12%, while the proportion of wholesale and retail sectors was 18% in the fiscal year 2015.
FBR spokesman, Dr. Najeb Memon, did not answer a question about the breakdown of the additional income tax of RS455 billion collected from the retail sector.
However, a FBR official said it was a definition problem since several categories were included in the retail sector and, as a result, the total contribution of the Income Tax reached RS617 billion.
With the additional RS455 billion, the total collection of income taxes of the retail sector should have been RS940 billion. In fiscal year 2023-24, the collection was from RS484 billion on the basis of the new definition, the sources said.
Retailers and merchants work under a highly informal mechanism. According to the contribution that the FBR has used to claim the collection of RS617 billion and an additional 45 billion, wholesalers, merchants and retailers are treated as part of the retail sector. These three categories pay the Income Tax in the form of advance income tax quarterly, the income tax admitted with annual statements, retention of sales on sales, purchases, imports and electricity bills, and other taxes.
FBR officials said that the collection of RS617 billion included RS316 billion taxes on income in advance. In the anticipated tax, the wholesalers paid RS30 billion, the merchants of RS49 billion and RS316 billion per retailers.
Similarly, the admitted income tax was RS28 billion, including RS14 billion merchants, RS5.3 billion retailers and RS8.5 billion wholesalers, sources said, and added that these three categories also paid RS216 billion in retention taxes. Of this, the wholesalers paid RS28 billion, RS119 billion merchants and RS69 billion retailers. In the category of others, these three categories paid RS57 billion in the Income Tax.
However, if one goes through the definition of the retail sector and its contribution, the sources said, in the fiscal year24, the payments of the retail sector were RS484 billion and in this case the net increase was RS133 billion.
The prime minister’s office said that Shehbaz Sharif told the meeting that recent improvements in fiscal machinery were “encouraging”, but the reforms must lead to the creation of a sustainable, digitized and facilitative tax system.
The prime minister ordered the FBR to accelerate the digital transformation, restructure its digital wing with a clear road map and improve the application to stop the informal economy. He also emphasized the importance of consulting the interested parties in the reform process, particularly with companies, merchants and taxpayers.
He reiterated that the improvement in the fiscal system should contribute to promoting national income while reducing the tax burden for the common citizen.
The meeting was reported that, as a result of reforms and compliance measures, the relationship imposed on GDP registered a historical increase of 1.5% in fiscal year 2015 compared to fiscal year 2014. However, the FBR lost the condition of the IMF to increase the ratio to 10.6% despite imposing record taxes.
The Prime Minister’s office said that the number of income tax declaration files increased from 4.5 million in 2024 to more than 7.2 million for June 30, 2025.
FBR officials also reported significant progress under the faceless customs authorization system, which increased income and expected to reduce the authorization time of 52 hours only 12 hours in the next three months.
