The Prime Minister's Office said on Wednesday that the retail sector paid an additional income tax of Rs455 billion in the last fiscal year, a startling claim made on the basis of a briefing given by tax authorities.
In an official statement released by the PM Office, it was stated "in the retail sector, tax collection increased by Rs455 billion compared to the previous year, driven by the integration of point-of-sale systems and stricter enforcement".
Officials of the Federal Board of Revenue (FBR) claimed that total income tax payments made by the retail sector in fiscal year 2024-25 were in fact Rs617 billion and the additional income tax was Rs455 billion. They said that the collection of Rs617 billion included Rs316 billion in quarterly advances given by three categories, wholesalers, retailers, traders and some companies.
The surprising Rs316 billion in quarterly advance could be looked into with critical lenses due to the highly informal nature of the sector. Sources in the FBR told The Express Tribune that a loose definition of the retail sector was used, which included some corporate sector firms.
The official statement added that Prime Minister Shehbaz Sharif chaired a review meeting on the ongoing reforms in the FBR, lauding the progress made so far while stressing the need for sustained and time-bound efforts to overhaul the tax system in line with modern requirements.
Sources said that during the meeting discussions took place on the share of retail and manufacturing sectors and the record tax contribution of Rs555 billion made by the salaried class. Some of the participants were of the view that the manufacturing sector and salaried individuals were highly overburdened compared to their contribution to the economy.
According to Pakistan Bureau of Statistics' (PBS) data, the share of the manufacturing sector in the economy was hardly 12% while the share of wholesale and retail sectors was 18% in FY25.
FBR spokesman Dr Najeeb Memon did not respond to a question about the breakdown of additional income tax of Rs455 billion collected from the retail sector.
However, an FBR official said that it was a definitional issue as various categories were included in the retail sector and as a result total income tax contribution reached Rs617 billion.
With the additional Rs455 billion, the total income tax collection from the retail sector should have been Rs940 billion. In fiscal year 2023-24, the collection was Rs484 billion on the basis of the new loose definition, said the sources.
Retailers and traders are functioning under a highly informal mechanism. According to the input the FBR has used for claiming the collection of Rs617 billion and an additional Rs455 billion, the wholesalers, traders and retailers are treated as part of the retail sector. These three categories paid income tax in the shape of advance income tax on a quarterly basis, admitted income tax with annual returns, withholding taxes on sales, purchases, imports and electricity bills, and other taxes.
FBR officials claimed that the collection of Rs617 billion included Rs316 billion in advance income tax. In the advance tax, Rs30 billion was paid by wholesalers, Rs49 billion by traders and Rs316 billion by retailers.
Likewise, the admitted income tax stood at Rs28 billion, including Rs14 billion from traders, Rs5.3 billion from retailers and Rs8.5 billion from wholesalers, the sources said, adding that these three categories also paid Rs216 billion in withholding taxes. Of this, the wholesalers paid Rs28 billion, traders Rs119 billion and retailers Rs69 billion. In the category of others, Rs57 billion in income tax was paid by these three categories.
However, if one goes by the definition of the retail sector and its contribution, the sources said, in FY24, payments by the retail sector were Rs484 billion and in this case the net increase was Rs133 billion.
The PM Office statement said that Shehbaz Sharif told the meeting that recent improvements in the tax machinery were "encouraging," but reforms must lead to the creation of a sustainable, digitised and facilitative tax system.
The PM directed the FBR to accelerate digital transformation, restructure its digital wing with a clear roadmap and enhance enforcement to curb the informal economy. He also stressed the importance of stakeholder consultation in the reform process, particularly with businesses, traders and taxpayers.
He reiterated that improvement in the tax system should contribute to boosting national revenue while reducing the tax burden on the common citizen.
The meeting was briefed that as a result of reforms and enforcement measures, the tax-to-GDP ratio registered a historic rise of 1.5% in FY25 compared to FY24. However, the FBR missed the IMF condition to increase the ratio to 10.6% despite imposing record taxes.
The PM Office said that the number of income tax return filers surged from 4.5 million in 2024 to over 7.2 million by June 30, 2025.
FBR officials also reported significant progress under the faceless customs clearance system, which increased revenue and was expected to reduce clearance time from 52 hours to just 12 hours in the next three months.
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