Islamabad:
The Prime Minister’s office said on Wednesday that the retail sector had paid an additional income on the 455 billion rupees in the last financial year, a surprising complaint made on the basis of a briefing given by the tax authorities.
In an official declaration published by the PM office, it was indicated “in the retail sector, the perception of taxes increased by 455 billion rupees compared to the previous year, driven by the integration of more strict sales and application systems”.
The officials of the Federal Board of Return (FBR) said that total income tax payments made by the retail sector during the year 2024-25 were in fact 617 billion rupees and the additional income tax was 455 billion rupees. They said that the RS617 billion collection included 316 billion rupees in the quarterly advances given by three categories, wholesalers, retailers, traders and certain companies.
The surprising RS316 billion in quarterly advance could be examined with critical lenses due to the very informal nature of the sector. FBR sources have told the Express PK Press Club that a loose definition of the retail sector had been used, which included certain companies in the business sector.
The official press release added that Prime Minister Shehbaz Sharif chaired an examination meeting on the ongoing reforms in the FBR, welcoming the progress made so far while highlighting the need for efforts supported and linked to time to revise the tax system in accordance with modern requirements.
Sources have indicated that at the meeting, the discussions had taken place on the part of the retail sectors and the manufacturing and the record tax contribution of 555 billion rupees made by the salaried class. Some participants were of the opinion that the manufacturing sector and employees were very overloaded from their contribution to the economy.
According to data from Pakistan Bureau of Statistics (PBS), the share of the manufacturing sector of the economy was hardly 12% while the share of the large and retail sectors was 18% during the financial year 2012.
The FBR spokesman, Dr. Najeeb Memon, did not answer a question about the distribution of additional income tax of 455 billion rupees collected in the retail sector.
However, an FBR official said it was a definition problem because various categories were included in the retail sector and, therefore, the total income tax contribution reached 617 billion rupees.
With the 455 billion additional rupees, the total income tax collection in the retail sector should have been 940 billion rupees. During the year 2023-24, the collection was 484 billion rupees on the basis of the new loose definition, according to sources.
Retailers and traders work under a very informal mechanism. According to the contribution that the FBR used to claim the collection of RS617 billion and 455 billion additional rupees, wholesalers, traders and retailers are treated as part of the retail sector. These three categories paid income tax in the form of prior income tax on a quarterly basis, admitted income tax with annual yields, retention of taxes on sales, purchases, imports and electricity bills and other taxes.
FBR officials said that RS617 billion collection included 316 billion rupees in advance of income tax. In the early tax, 30 billion rupees were paid by wholesalers, 49 billion rupees by traders and 316 billion rupees by retailers.
Likewise, the admitted income tax amounted to 28 billion rupees, including 14 billion rupees of traders, 5.3 billion rupees from retailers and 8.5 billion rupees from wholesalers, said sources, adding that these three categories also paid 216 billion rupees to tax restraint. From this, wholesalers paid 28 billion rupees, merchants of 119 billion rupees and retailers of 69 billion rupees. In the category of others, 57 billion income tax rupees were paid by these three categories.
However, if we are preparing for the definition of the retail sector and its contribution, the sources said that, during the year 2000, the payments of the retail sector were 484 billion rupees and in this case, the net increase was Rs133 billion rupees.
The PM office press release said Shehbaz Sharif told Reunion that recent improvements in tax machines were “encouraging”, but that reforms were to create a sustainable, digitized and facilitative tax system.
The PM has ordered the FBR to accelerate digital transformation, restructure its digital wing with a clear roadmap and improve the application to curb the informal economy. He also highlighted the importance of consulting stakeholders in the reform process, in particular with companies, traders and taxpayers.
He reiterated that improving the tax plan should help increase national income while reducing the tax burden on the common citizen.
The meeting was informed that following reforms and application measures, the tax ratio / GDP recorded a historic increase of 1.5% in financial year 25 compared to financial year 24. However, the FBR missed the Condition of the IMF to increase the ratio to 10.6% despite the taxation of record taxes.
The PM office said that the number of income declarations increased from 4.5 million in 2024 to more than 7.2 million by June 30, 2025.
FBR officials have also reported significant progress as part of the face -to -date customs clearance system, which increased income and had to reduce customs clearance from 52 hours to just 12 hours in the next three months.
