The International Monetary Fund (IMF) has proposed that Pakistan introduce a new asset-based taxation scheme targeting traders who remain outside the formal tax system, despite multiple previous attempts to bring them under compliance.

The recommendation follows the limited success of earlier initiatives such as the Tajir Dost Scheme and retail sector-based tax targets, which failed to generate meaningful results.

Under the IMF’s proposal, traders would be taxed based on their assets rather than the size or location of their shops. However, officials at the Federal Board of Revenue (FBR) have expressed concerns, noting that assessing the assets of traders could be challenging as many do not file tax returns.

Over the past three years, the government has rolled out several schemes aimed at taxing retailers. During the tenure of the PDM government, a fixed tax collection mechanism through electricity bills was introduced but later withdrawn following political opposition. The current administration implemented a new traders’ scheme targeting Rs. 50 billion in the fiscal year 2024-25, with monthly taxes ranging from Rs. 100 to Rs. 60,000 depending on business premises.

The scheme was launched in 42 cities but was suspended after traders staged nationwide strikes in August 2024. Tax authorities say strong political resistance and the organized influence of traders have made it difficult to expand the tax base. While measures such as point-of-sale systems and invoice digitization are being implemented, officials warn these steps alone may not achieve desired compliance.

According to FBR data, traders paid only about Rs. 28 billion in withholding taxes during the first eight months of the current fiscal year, just Rs. 5 billion higher than the same period last year. Including supply-stage taxes, total collections reached approximately Rs. 45 billion—far below the over Rs. 350 billion contributed by salaried individuals during the same period.

Meanwhile, the FBR is grappling with a widening revenue gap. Against an annual target of Rs. 14.13 trillion, the authority may fall short by Rs. 800 billion to Rs. 1 trillion. The shortfall for the first eight months has already crossed Rs. 640 billion, prompting the FBR to request a downward revision of the target to around Rs. 13.5 trillion.