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FBR’s Tax Registration Drive: Progress and Challenges
The Federal Board of Revenue (FBR) has been conducting a tax registration drive for nearly five months across 42 cities, successfully bringing thousands of traders onto the tax roll. However, under the Tajir Dost Scheme (TDS), the average income tax collected from an individual trader remains low at just Rs2,432 per month.
Tax Contributions from the Retail and Wholesale Sectors
Despite the retail and wholesale sectors contributing 20% to the country’s gross domestic product (GDP), their tax contribution is only 4%. The government has been working for years to effectively bring these sectors into the tax net.
Out of an estimated 3.5 million retailers, only 300,000 are actively filing tax returns. The TDS aims to incorporate the remaining 3.2 million retailers into the formal tax system.
Since the launch of the scheme on April 1, over 64,000 traders have been registered by the tax authorities. The first phase of the scheme covered six cities: Karachi, Lahore, Islamabad, Peshawar, Quetta, and Rawalpindi. In July, the scope of the registration was expanded to 36 additional cities.
Low Compliance and Registration Numbers
On Wednesday, official sources reported that the FBR collected a total of Rs503,363 in income tax from 207 traders across 42 cities. This low compliance rate indicates that although many traders have registered under the TDS, they remain reluctant to pay income tax.
Among the registered traders, 56,081 were from the initial six cities, while only 7,919 were from the newly added 36 cities. This disparity suggests that the registration drive has been less effective in the newer cities.
A city-wise breakdown of registered traders shows that Lahore had the highest number of registrations at 25,138, followed by Rawalpindi (9,562), Karachi (7,971), Islamabad (5,651), Peshawar (4,779), and Quetta (2,980).
Notifications Issued to Implement the Scheme
To implement the scheme, the government issued SRO 457 of 2024 on March 31, outlining special procedures for the Tajir Dost Scheme. Another notification, SRO 1064 of 2024, was issued on July 22, specifying the area-wise monthly advance tax for traders.
Under the scheme, tax rates are set for shopkeepers at a fixed rate, ranging from Rs100 to Rs60,000 per month, depending on the fair market value of their stores and sales. The objective is to bring traders and wholesalers into the formal tax structure, as required by the International Monetary Fund (IMF).
Challenges Ahead
Despite these efforts, the government’s attempts have not yet yielded the desired results. On Wednesday, a nationwide shutter-down protest was observed, and traders are expected to announce their next strategy in the coming days.
The FBR continues to face challenges in encouraging higher compliance rates among traders and effectively expanding the tax base to achieve sustainable economic growth.
