The federal government has proposed a new fixed tax framework for small retailers and shopkeepers as part of its FY2026-27 budget measures, aiming to simplify tax compliance and expand participation in the formal economy.
Under the proposed changes, small businesses operating with annual sales of less than Rs. 10 million will be brought under a fixed tax system through Section 99B of the Income Tax Ordinance. The initiative is designed to create a simpler and more predictable taxation structure for small-scale retailers across Pakistan.
According to budget documents, eligible shopkeepers and retailers will be required to pay a tax equivalent to 0.5% of their annual sales. The government believes the fixed-rate approach will reduce complexity for small businesses while making tax obligations easier to understand and fulfill.
Officials say the new system is intended to encourage greater tax compliance among retailers who may find traditional tax procedures difficult to navigate. By introducing a straightforward calculation based on annual sales, authorities hope to increase documentation and bring more businesses into the formal tax net.
The proposal also provides flexibility for taxpayers by allowing retailers to adjust withholding taxes already paid against their final tax liability. This adjustment mechanism is expected to prevent double taxation and reduce the overall burden on compliant businesses.
In addition, the government has proposed a minimum payment requirement of Rs. 25,000 at the time of filing the tax statement. The measure is aimed at ensuring a baseline level of contribution while maintaining a simplified taxation process for smaller enterprises.
Small and medium-sized businesses form a significant part of Pakistan’s retail sector and play an important role in employment generation and economic activity. Policymakers believe that a simplified tax regime can help improve compliance rates without placing excessive administrative burdens on business owners.
Economic experts note that fixed tax systems are often used to encourage voluntary participation in taxation, particularly among smaller businesses with limited accounting resources. A predictable tax structure can also help retailers better manage financial planning and operational costs.
The proposed scheme is part of the government’s broader effort to reform the tax system, enhance documentation, and increase revenue collection through simplified compliance measures. If approved, the new framework could affect thousands of shopkeepers and small retailers across the country from the upcoming fiscal year.
The initiative reflects the government’s ongoing focus on broadening the tax base while providing practical solutions for small businesses operating in Pakistan’s retail economy.
