The federal government on Friday introduced a fixed tax scheme for small shop owners as part of its ongoing efforts to expand tax collection and document the economy.

Finance Minister Muhammad Aurangzeb announced the scheme during a joint press conference with State Minister for Finance Bilal Azhar Kiani, outlining its key features and objectives.

FinMin Aurangzeb said that economic stability must be maintained and that increasing the country’s revenue to a specific level remained important.

“Everyone says that instead of increasing tax rates at this time, there is a need to reduce them,” the finance czar said.

According to the finance minister, an estimated three to four million small traders fell within this category.

He welcomed the participation of traders who had not previously contributed to the tax net, saying they were now coming forward voluntarily.

Aurangzeb said that all stakeholders wanted to play their part in national resources and that the scheme was being introduced in line with consultations and demands from small traders.

Speaking on the occasion, Kayani said the simplified scheme would apply to shopkeepers whose annual sales do not exceed Rs200 million, saying the government was bringing the fixed tax framework to make it easier for small traders to fulfil their tax obligations.

“This is a one-page form on which traders will record the sale of their goods,” Kayani said, adding that the scheme was being introduced following consultations and demands from traders’ associations.

Key features

Outlining details of the initiative, Kayani said that the scheme carries a fixed tax rate of 1%, while any withholding tax already deducted will be adjusted against it.

He added that the minimum tax payment under the scheme would be Rs25,000, while businesses with higher turnover would pay tax at 1% according to their sales volume.

The minister said that both filers and non-filers could become part of the scheme by submitting the required form.

According to Kayani, traders seeking to benefit from the programme must ensure their tax payment is at least equal to the previous year’s amount.

The minister said every trader enrolled in the scheme would receive a plate issued by the Federal Board of Revenue (FBR).

The plate would display the trader’s name, shop name and declare him a responsible taxpayer, he added

Kayani further said traders participating in the scheme would be exempt from FBR’s point of sale (POS) requirement, describing the measure as part of efforts to simplify tax compliance for small businesses.