Islamabad 24 July: Pakistan’s retail sector contributed a record-breaking Rs 617 billion in income tax during FY 2024–25, marking an increase of Rs 455 billion over the previous year.
The figures were shared during a high-level briefing chaired by Prime Minister Shehbaz Sharif, highlighting the impact of ongoing tax reforms and digital compliance measures.
The Federal Board of Revenue (FBR) attributed this increase to enhanced compliance enabled by digital tools such as mandatory point-of-sale (POS) integration and stricter enforcement mechanisms. An FBR spokesperson noted, “Digital tracking has changed the game. Retailers can no longer hide sales.”
According to news reports this jump helped raise Pakistan’s tax-to-GDP ratio to 10.6% in FY 2024–25, up from 9.1% the previous year. During this period, the number of income tax return filers surged from 4.5 million to over 7.2 million by June 2025.
Digital Initiatives Streamline Administration
The FBR has also rolled out a “faceless” customs clearance system, the POS mandate, and real-time tax collection tracking. Officials said customs clearance times are projected to fall from 52 hours to 12 hours by October 2025
Prime Minister Sharif praised the reforms but called for continued digital restructuring across the FBR, emphasizing “time-bound results” to sustain momentum.
Challenges Ahead for Small Retailers
Despite the progress, small retailers continue to struggle with the new system. Farooq Ahmed, a shop owner in Rawalpindi, said, “The new systems are tough for small shops with no tech know-how, but the FBR’s crackdowns leave us no choice but to comply.”
Meanwhile, the informal sector remains a concern. A March 2025 report showed that while retailers paid Rs 23 billion in withholding taxes on purchases, salaried individuals contributed Rs 331 billion — highlighting an over 1,300% disparity. The Tajir Dost scheme, aimed at registering small retailers, has underperformed, raising questions about capturing the informal economy effectively.
Economist Dr. Nadia Khan of Lahore warned, “Focusing on registered businesses while the informal sector slips through creates an unfair burden … unregistered markets remain a blind spot.”
Government Targets Tax-to-GDP Ratio of 13%
Prime Minister Sharif has directed the FBR to finalize new reform targets within a week. Under its IMF-backed three-year programme, the government is aiming for a 13% tax-to-GDP ratio, with the retail sector playing a crucial role.
