ISLAMABAD: The Federal Board of Revenue (FBR) has admitted that Pakistan is losing nearly Rs3.6 trillion in sales tax almost equal to the amount already collected largely due to the fragmented and informal retail sector.
According to an assessment recently shared with the Prime Minister’s Office, the retail sector alone contributes about Rs310 billion to the shortfall. Despite this, tax officials claim they managed to collect Rs874 billion in the last fiscal year through enforcement, though no detailed breakup has been provided despite repeated queries.
Officials said the biggest leakage comes from the textile sector (Rs814 billion), followed by petroleum and food products (Rs384 billion each), chemicals and fertilizer (Rs326 billion), iron and steel (Rs200 billion), electronics (Rs193 billion) and beverages (Rs101 billion). Surprisingly, the sugar sector long targeted by FBR accounts for only Rs46 billion of the gap.
FBR sources acknowledged that enforcement at the retail level remains difficult, as most traders operate outside formal systems. They added that successive governments have failed to bring retailers into the tax net despite incentives and strict measures. Now, authorities are shifting focus towards manufacturing and digital solutions, including electronic invoicing and supply chain tracking, though credibility was questioned after FBR recently accepted large cash deposits as “digital transactions.”
The issue has also triggered tensions with traders. In Lahore, a businessman alleged harassment by tax officers, prompting the Lahore Chamber of Commerce and Industry to demand the transfer of a senior tax commissioner. Its president even threatened to resign by October 1 if corrective steps are not taken.
Despite missing its overall revenue target of Rs11.74 trillion by Rs1.2 trillion, the FBR insists its enforcement push has raised Pakistan’s tax-to-GDP ratio from 8.8% to 10.24%. Officials say this keeps the country on track to meet its IMF commitment of reaching 13.7% by 2027.
So far, 12,805 businesses with a combined turnover of Rs33.3 trillion have registered with licensed digital integrators two thirds of Pakistan’s total sales. FBR claims nearly 100 enforcement actions have already been taken nationwide, including against jewellers and furniture shops, often with the help of police and magistrates.
Still, the Rs3.6 trillion gap highlights the massive challenge: unless Pakistan can bring its scattered retail economy into the formal system, billions will continue to slip through the cracks.
