In a bold move to curb tax evasion in the retail sector, the federal government of Pakistan is gearing up to implement tough new penalties in the upcoming fiscal budget.
According to a briefing given by Federal Board of Revenue (FBR) officials during a Senate Finance Committee meeting, the fine for retailers involved in tax evasion could jump from the current Rs. 500,000 to a staggering Rs. 5 million.
The proposed reforms aim to tackle widespread tax non-compliance among shopkeepers and business owners. Alongside increased penalties, the government is also considering launching a reward scheme for whistleblowers who identify fake transaction receipts. Under this scheme, informants may receive up to Rs. 10,000 for providing credible information.
As part of broader reforms, the FBR plans to expand the Point of Sale (POS) network, targeting 70,000 registered retailers across the country. Officials confirmed that retail tax monitoring will become more aggressive, with surveillance cameras and monitoring staff being deployed in various commercial areas.
To boost tax transparency and compliance, sectors such as poultry, tobacco (green leaf), and beverages will be closely monitored in the upcoming financial year. The initiative builds on the FBR's recent success in monitoring sugar mills, which resulted in a 34.5% increase in tax collection.
Chairman of the Senate Committee, Saleem Mandviwalla, raised concerns during the session about delayed sales tax refunds. Exporters have reportedly faced months-long delays, despite official claims that refunds in priority sectors — including textiles, sports goods, carpets, leather, and surgical equipment — are being processed within days.
FBR officials explained that refunds for these sectors are now processed automatically and credited directly to exporters’ accounts. They also hinted at upcoming reforms to phase out local manual refunds in favor of a streamlined digital system by October.
The crackdown on tax evasion is already underway in cities like Lahore, Karachi, and Islamabad, where 20 businesses are being sealed daily for non-compliance. Authorities plan to extend this drive to more cities and increase both the number of inspections and the severity of penalties.
In an innovative approach to manpower shortages, FBR is considering deploying university students outside shops to assist with compliance monitoring. The number of shops under the POS system is expected to grow from 40,000 to 70,000 this year.
To support the initiative, a nationwide media campaign is also in the works to educate the public about tax evasion, encourage reporting, and promote responsible business practices.
If approved, the new fine structure and incentive schemes will take effect from July 2025, subject to parliamentary approval.
