Islamabad:
The Prime Minister’s office said Wednesday that the retail sector paid an extra income tax of RS455 billion in the last financial year, a surprising claim on the basis of a briefing given by the tax authorities.
In an official statement released by the PM office, it was stated “in the retail sector, tax collection increased by RS455 billion compared to the previous year, driven by the integration of sales systems and stricter enforcement”.
Officials in the Federal Board of Revenue (FBR) claimed that the total income tax payments made by the retail sector in the financial year 2024-25 were actually RS617 billion and the extra income tax was RS455 billion. They said the collection of RS617 billion included RS316 billion in quarterly progress given by three categories, wholesalers, retailers, dealers and some companies.
The surprising RS316 billion in quarterly advances could be examined with critical lenses due to the very informal nature of the sector. Sources in FBR told The Express Pakinomist that a loose definition of the retail sector was used, which included some business sector companies.
The official statement added that Prime Minister Shehbaz Sharif was chairman of a review meeting on the ongoing Reforms in the FBR, where they made progress so far, while emphasizing the need for sustained and time -bound efforts to undergo the tax system in accordance with modern requirements.
Sources said during meeting discussions took place on the proportion of retail and manufacturing sectors and record tax contributions of RS555 billion made by the grade. Some of the participants were of the opinion that the manufacturing sector and the paid persons were very overloaded compared to their contribution to the economy.
According to the Pakistan Bureau of Statistics’ (PBS) data, the proportion of the manufacturing sector in the economy was hardly 12%, while the proportion of wholesale and retail sectors was 18% in FY25.
FBR spokesman Dr. Najeeb Memon did not answer a question of the breakdown of additional income tax on the RS455 billion collected from the retail sector.
However, an FBR official said it was a definitive question when different categories were included in the retail sector and, as a result, reached the total income tax contribution RS617 billion.
With the additional RS455 billion, the total collection of income tax from the retail sector should have been RS940 billion. In the financial year 2023-24, the RS484 billion collection was on the basis of the new loose definition, the sources said.
Retailers and dealers work under a very informal mechanism. According to input used by FBR to demand the collection of RS617 billion and a further RS455 billion, wholesalers, dealers and retailers are treated as part of the retail sector. These three categories paid income tax in the form of advance on income tax quarterly, admitted income tax with annual returns, withholding tax on sales, purchases, imports and electricity bills and other taxes.
FBR officials claimed that the collection of RS617 billion included RS316 billion in advance income tax. In advance tax, the RS30 billion was paid by wholesalers, RS49 billion of dealers and RS316 billion of retailers.
Likewise, the raised income tax of RS28 billion, including RS14 billion from merchants, accounted for RS5.3 billion from retailers and RS8.5 billion from wholesalers, the sources said, adding that these three categories also paid RS216 billion in source tax. Of this, the wholesalers paid RS28 billion, dealers RS119 billion and retailers RS69 billion. In the category of others, RS57 billion in income tax was paid for by these three categories.
But if one goes according to the definition of the retail sector and its contribution, the sources said in FY24, payments from the retail sector were RS484 billion, and in this case the net increase was RS133 billion.
The PM Office declaration said that Shearh Sharif told the meeting that the recent improvements in the tax machinery were “encouraging” but reforms should lead to the creation of a sustainable, digitized and lighter tax system.
The Prime Minister instructed FBR to speed up digital transformation, restructure his digital wing with a clear timetable and improve enforcement to limit the informal economy. He also emphasized the importance of consulting stakeholders in the reform process, especially with companies, dealers and taxpayers.
He reiterated that the improvement of the tax system should help to increase national revenue while reducing the tax burden on the common citizen.
The meeting was informed that as a result of reforms and enforcement measures, the tax-to-BNP relationship recorded a historic increase of 1.5% in FY25 compared to FY24. However, FBR missed the IMF condition to increase the ratio to 10.6% despite imposing registration fees.
The PM office said the number of income taxiers increased from 4.5 million by 2024 to over 7.2 million by June 30, 2025.
FBR officials also reported significant progress under the faceless customs clearance system, which increased revenue and was expected to reduce the approval time from 52 hours to just 12 hours in the next three months.
