A tax scheme in trouble

EDITORIAL: The latest figures on the Fixed Tax Asaan Scheme expose the familiar failure of yet another attempt to bring Pakistan’s chronically under-taxed retail sector into the tax net. According to a media report, with only a week left before the filing deadline, just two previously unregistered traders have opted for the scheme, while another 315 participants were already part of the tax system.

The numbers are frankly embarrassing for a government that offered traders a simplified tax regime and extensive concessions to address their long-standing objections. But the results so far suggest that incentives alone will not bring this sector into the tax net.

The numbers are especially revealing, given the scale of the ambition. Against an annual revenue target of Rs50 billion, the scheme has generated only around Rs26 million, averaging roughly Rs81,944 per participating trader. This is a far cry from the government’s hope that a substantial share of the estimated 3.5 million eligible traders would participate, and demonstrates the scheme has made little headway in its central aim of bringing previously undocumented retailers into the formal tax net.

The highly dismal uptake also makes the government’s immediate response, an intensified awareness campaign and greater involvement of local tax bars in helping traders register, difficult to see as sufficient. There is no harm in ensuring that eligible shopkeepers have information and assistance, but this is hardly a problem of awareness after months of publicity. Nor can this be attributed to a lack of incentives.

The government had already made the scheme considerably attractive, offering traders with annual sales of up to Rs200 million a simplified one-page return and a one percent tax on turnover, alongside protection from routine FBR interventions and audits, as well as exemptions from mandatory POS and withholding-agent requirements.

It is high time, therefore, that the authorities recognised the limits of concessions and persuasion, and confronted the basic reality that a sector with considerable economic and political heft has little incentive to volunteer for taxation. For decades, trader resistance has demonstrated its high nuisance value through strikes, shutter-downs and political pressure, with governments too often treating such disruption as something to avoid rather than manage in the larger public interest.

The result is a deeply inequitable tax system in which those already within the net bear a disproportionate fiscal burden. That makes credible enforcement all the more important, yet the penalties being proposed for those who fail to file their returns hardly constitute a serious deterrent. A fine of Rs10,000 in the first month, rising to Rs25,000 and then Rs50,000 would hardly be significant if a business is capable of generating millions in monthly sales. Penalties must be proportionate to the scale of the business, automatically imposed and actually recovered; otherwise, they risk becoming yet another unenforced provision that exists on paper but does little to change behaviour.

The government should also move beyond voluntary declarations and look towards data that can help identify commercial activity, from electricity bills and property records to banking, import and withholding-tax data. These can be used to develop risk-based profiles and target persistent non-filers. Registration drives should be followed by systematic verification, and repeated refusal to comply should have meaningful consequences.

But effective enforcement requires political backing. If credible action is softened whenever traders threaten disruption, no tax regime will ever succeed. The government has offered this sector an unusually accommodating route into the tax system. If even that fails to produce meaningful participation, the next step cannot be another concession. It must be enforcement backed by a firm political resolve. The Asaan tax scheme may still be salvaged, but only if the government is prepared to pair its concessions with strict enforcement.

Copyright Business Recorder, 2026