Govt to introduce 'Tajir Doost' fixed income tax scheme for retailers

The federal and provincial governments of Pakistan are set to launch a new fixed-income tax scheme called 'Tajir Doost' this month, targeting the registration of retailers, shopkeepers, and professionals.

This initiative comes with an incentive of a 50% tax reduction for those who voluntarily comply.

Sources reveal that the Federal Board of Revenue (FBR) aims to bring all retailers into the tax net as part of its documentation drive.

Currently, out of an estimated 3.5 million retailers, only about 300,000 are actively filing tax returns. The new scheme is expected to register the remaining 3.2 million retailers in major cities across the country.

The primary goal of 'Tajir Doost' is to document economic activities rather than to generate revenue from retailers.

Registration will be mandatory for all professionals and retail business owners.

To facilitate this, the FBR has developed a mobile app through which new retailers can register by submitting details such as shop size, electricity meter number, and other relevant information.

Under the proposed scheme, a retailer's tax liability will be determined based on the FBR's property valuation and the rental value of the shop.

The mobile app will automatically calculate an indicative tax based on these values. The calculated annual tax will be divided into monthly installments for advance tax payments.

In addition to the registration incentive, the FBR will offer a 50% reduction in tax payments for retailers who voluntarily register under this new system.

Furthermore, the FBR has planned a door-to-door campaign starting January 2024 in the four provincial capitals and Islamabad to register non-filing retailers and streamline their tax filing process. The FBR intends to use electricity meter data to identify tax evasion and conduct audits when necessary.

To ensure the integrity of the scheme, the FBR will conduct random audits to verify the accuracy of valuations and payments.

The scheme is designed to minimize discretion by field offices in altering valuations and assessments.

Any advance tax payments made under the scheme will be credited against the final income tax liabilities at the year's end during return filing, but refunds for such advance tax payments will not be issued, as per the FBR's statement.