THE Fixed Tax Asaan Scheme for traders with an annual turnover of up to Rs200m has been designed as a ‘pragmatic alternative’ to pull Pakistan’s vast, informal retail sector into the tax net without triggering the political backlash a bolder reform would invite. It is a concession to a powerful constituency that forms the core of the ruling PML-N in Punjab — and its costs will be borne by those already inside the documented economy. The math is simple. The retail sector turns over an estimated Rs10-15tr annually but contributes almost nothing to direct tax revenues. The scheme’s Rs50bn target, even if fully met, would represent a rounding error against what actual compliance at standard rates could yield. A 1pc voluntary turnover tax, with no audits, no digital invoicing and no point-of-sale requirements, does not bring traders into the documented economy. It creates a parallel track for them to stay outside it. The contradiction runs deeper than the numbers suggest. The government is expanding POS infrastructure to penalise cash transactions and push merchants towards digital payments under a cashless economy initiative. However, this scheme leaves out the very segment the initiative is designed to document. How can a government pursue such digitisation of commerce while giving a guarantee to its most resistant segment that its requirements will not apply to them?

What makes this scheme particularly indefensible is the contrast with sectors without the political leverage to negotiate. Salaried individuals face automatic deduction at source. Pakistan is already among the region’s most heavily taxed corporate jurisdictions. The MNC exodus is now an entrenched trend. A tax system that overburdens compliant sectors while negotiating preferential arrangements for non-compliant ones will run out of compliant actors to burden. Other developing economies have found better solutions. Bangladesh, for instance, introduced mandatory electronic fiscal devices for traders above a turnover threshold, phased over three years with graduated penalties for non-compliance, and recorded measurable increases in VAT collection from the retail sector within two years. Kenya cross-referenced trader incomes against mobile money platform data and issued automated tax assessments without requiring traders to self-declare.

Pakistan has the same mobile money infrastructure and data-matching capability. What it lacks is the political will to deploy them against a powerful constituency. Traders are the PML-N’s urban Punjab base. The 2022 episode — when Maryam Nawaz rebuked her own finance minister for attempting a minimum shop tax — clearly showed where enforcement attempts end. What is worth noting is not just that the government backed down then, but that it has also internalised that lesson into policy design. It shows that influential groups that keep being taxed differently are the country’s key fiscal problem.

Published in Dawn, June 8th, 2026