ISLAMABAD, July 25, 2025 – The retail sector paid an additional Rs455 billion in income tax during fiscal year 2024-25, according to a briefing shared with Prime Minister Shehbaz Sharif at a high-level review meeting on Federal Board of Revenue (FBR) reforms.
An official statement from the PM Office said total tax collection from the retail sector reached Rs617 billion, driven by stricter enforcement and integration of point-of-sale (POS) systems. However, questions have emerged over how the retail sector was defined, with FBR sources admitting that wholesalers, traders, and even some corporate firms were included in the broader category.
Tax Collection Breakdown Raises Eyebrows
According to FBR officials, the Rs617 billion figure comprised:
Rs316 billion in quarterly advance tax,
Rs28 billion admitted in annual tax returns, and
Rs216 billion in withholding taxes collected on sales, purchases, imports, and electricity bills.
However, critics argue the numbers are misleading, as the retail sector remains largely informal. Under a stricter definition, retail tax collection last year stood at Rs484 billion, meaning the net increase was only Rs133 billion, not Rs455 billion.
FBR insiders revealed that in the advance tax component:
Wholesalers paid Rs30 billion,
Traders paid Rs49 billion, and
Retailers contributed Rs316 billion.
Meanwhile, withholding taxes contributed Rs28 billion from wholesalers, Rs119 billion from traders, and Rs69 billion from retailers.
Despite the inflated categorization, the PM Office lauded the increase, noting that the number of income tax return filers jumped from 4.5 million in 2024 to 7.2 million by June 2025.
Manufacturing & Salaried Class Overburdened
The meeting also discussed the tax burden imbalance between different economic sectors. Officials noted that manufacturing accounts for only 12% of GDP, while wholesale and retail sectors contribute 18%, yet salaried individuals and manufacturers continue to bear a disproportionate tax load.
Despite the reforms, FBR missed its IMF-mandated tax-to-GDP ratio target of 10.6%, achieving only a 1.5% improvement.
PM Orders Digital Transformation
Prime Minister Shehbaz Sharif praised the “encouraging” progress but directed FBR to accelerate digital transformation, restructure its IT systems, and consult businesses and taxpayers to create a more sustainable and facilitative tax regime.
The PM emphasized that improving tax collection must reduce the burden on ordinary citizens while curbing the informal economy.
Meanwhile, FBR reported significant progress in faceless customs clearance, which has already boosted revenue and is expected to cut cargo clearance time from 52 hours to just 12 hours in the coming months.
