ISLAMABAD: The government has discreetly expanded the scope of the traders’ scheme to include shops located in residential areas, as uncertainty looms over the approval of the $7 billion International Monetary Fund (IMF) programme due to a financing gap and ad-hoc relief for electricity consumers.
Recently, the federal government extended the retailers’ scheme to cover 100-square-foot shops in residential areas, which were previously exempt from the fixed income tax of Rs100 to Rs60,000 per month. This move was essential to address IMF objections regarding the narrow base of the new scheme. However, due to mounting pressure from traders and the Jamaat-e-Islami, the government has kept this decision under wraps. Sources reveal that the changes were made in the Tajir Dost Special Procedure notification to meet IMF concerns, but the revised gazette notification has not been made public to avoid backlash.
A senior FBR official confirmed that traders operating in residential areas are now included in the fixed income tax scheme. Last month, the government launched this new scheme for traders with the goal of collecting Rs50 billion during the fiscal year 2024-25. However, certain exclusions, particularly for 100-square-foot shops, have made it challenging for the Federal Board of Revenue (FBR) to meet this target. So far, only 62 traders have entered the tax net, contributing just Rs115,000 towards the Rs50 billion target, highlighting the government’s weakening political resolve to defend critical economic decisions.
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This development occurs amid uncertainty regarding the IMF executive board meeting, which is expected to take place by the end of August. Finance ministry sources have indicated that efforts are underway to ensure the meeting proceeds as announced by Finance Minister Muhammad Aurangzeb. However, both the IMF and the finance ministry have remained silent on the matter. The IMF has conditionally circulated Pakistan’s case for approval, citing an unmet external financing gap. China has yet to roll over its maturing foreign commercial loans, leaving this gap unaddressed before the board meeting.
The finance minister recently mentioned that all three bilateral creditors have agreed to roll over $12 billion in cash deposits. The central bank Governor, Jameel Ahmad, highlighted the need for a $4.4 billion commercial loan rollover by China. Punjab’s unilateral decisions to provide a Rs14 per unit electricity subsidy to consumers using up to 500 units monthly and distribute Rs700 billion worth of rooftop solar panels are seen as contrary to the spirit of the $7 billion structural reforms programme.
The IMF’s new programme targets traders, agriculturalists, and exporters—the three sectors not paying taxes commensurate with their economic contributions. The coalition government announced the traders’ scheme for dealers, distributors, retailers, manufacturer-cum-retailers, importer-cum-retailers, or any person involved in the supply chain of goods doing business in 42 cities across Pakistan.
This development comes amid a strike call by the Central Organisation of Traders and All Pakistan Anjuman-e-Tajiran, which has announced a nationwide shutter-down strike on August 28.
