The Senate Standing Committee on Finance has rejected the Federal Board of Revenue (FBR) proposal to increase the sales tax on POS-connected tier-1 retailers from 15% to 18% in the 2024-25 budget.
The Pakistan Retail Business Council (PRBC), led by Ziad Bashir, presented their case to the committee, arguing against the tax hike. Bashir highlighted that only 5% of the retail sector is registered, and these retailers already face significant tax burdens, while 95% of the sector remains untaxed. He explained that the documented retail sector is currently paying a cumulative 57% in various taxes, including 29% income tax, 10% super tax, 15% dividend tax, and 7% Workers Welfare Fund and workers participation fund. Increasing the sales tax by 3% would raise their total tax burden to 60%.
The committee acknowledged the PRBC’s concerns and noted that the current taxation system unfairly penalizes compliant retailers with higher effective tax rates compared to those who evade taxes. They emphasized the need for comprehensive reforms to establish a fair tax structure that rewards compliance and penalizes evasion.
