FBR to serve Rs150,000 penalty notices as retailer tax scheme lags
Pakistan's Federal Board of Revenue (FBR) has decided to move against non-compliant shopkeepers under existing tax law rather than the fixed tax scheme for retailers, with the first notices carrying a Rs150,000 penalty. According to The Express Tribune, the FBR plans to map 30,000 traders to receive that first notice, a target the report describes as over-ambitious.
The decision follows weak take-up of the scheme, which the government had presented as a simplified route for retailers. As of Wednesday, only 100 new traders had joined and filed returns, paying Rs3.2 million in income tax as their full and final liability for tax year 2026, which ended in June. Their average payment was Rs32,000, some Rs7,000 above the minimum required under the scheme. A total of 2,593 new retailers registered, but only 100 opted to file, and of the more than 1,000 returns submitted overall, the report says 99% came from traders already inside the tax system who contributed very little. According to the FBR, Pakistan has 4.3 million traders, of whom only 600,000 are in the tax system; the scheme targeted the remaining 3.7 million shopkeepers.
Government sources told The Express Tribune that the scheme's failure has triggered an internal blame game. In a meeting, they said, the FBR administration described the scheme as not implementable, arguing it contained no effective punitive measures to compel traders to become filers. The Rs10,000 first-month penalty it offered was far lower than the penalties available under the Income Tax Ordinance for failing to file an income tax return and a wealth statement, they said. Sources said two views exist within the government: one favouring a gradual escalation from Rs10,000 to Rs25,000 and then Rs50,000, and another urging patience with the penalty path set out in the scheme itself.
Tax officials said the scheme is voluntary and that those who do not join before the extended deadline expires face treatment under existing law. They said the FBR would send at least 10,000 to 15,000 notices under Section 114(4) of the Income Tax Ordinance rather than under the fixed tax scheme. Under Section 182(1), a person who fails to furnish a return by the due date faces a minimum penalty of Rs10,000 if an individual with 75% or more income from salary, or Rs50,000 in all other cases, plus a Rs100,000 penalty for not filing a wealth statement. Section 182(1AA) provides for a penalty of 0.1% of taxable income per week, or Rs100,000, whichever is higher, for failure to file a wealth statement or reconciliation.
The government faces a further challenge, with traders announcing a partial strike on Thursday against the registration of police cases for the use of plastic bags. Traders' leader Ajmal Baloch said he still supported the fixed tax scheme and that the protest was directed only at the ICT administration. He said someone within the government was trying to sabotage the scheme by creating hurdles to the online application used to file returns, which he said was often non-operational or beset by technical glitches. He added that the application had not allowed adjustment of withholding tax paid through electricity bills, and that this was rectified on Wednesday.
