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Retailers denounce harsh tax measures
Retailers denounce harsh tax measures

Express Tribune

time4 days ago

  • Business
  • Express Tribune

Retailers denounce harsh tax measures

Policymakers are expected to continue improvements on tax collection side to widen the tax net by signalling reduction in corporate and salary tax by 1% per year for the next 10 years and by reducing industrial energy tariffs. photo: file Listen to article The Chainstore Association of Pakistan (CAP), which represents the country's organised retail sector, has voiced concerns over harsh tax measures and enforcement practices, particularly those introduced through the Finance Act 2025. "Retail chains in the formal sector have worked tirelessly for years to adopt technology, ensure transparent sales reporting and contribute significantly to the nation's tax revenues as well as its exports," said Asfandyar Farrukh, Chairman CAP. "Yet, we face an unsustainable environment where legitimate businesses are treated as potential offenders, subjected to arbitrary tax assessments and left exposed to daily harassment that threatens both our operations and workforce." The association noted that while formal retailers accounted for only around 10% of Pakistan's retail trade, they generated the majority of tax revenue from the sector. However, recent tax policies and enforcement actions have placed growing pressure on the industry and threaten progress in documenting the economy. "It is our considered view that, given ever-increasing revenue targets and the slow pace of broadening the tax base, some FBR field formations are using enforcement powers to impose excessive and arbitrary tax assessments and penalties on the already compliant businesses simply to boost collections," said Tariq Mehboob, Patron-in-Chief of CAP. Similarly, the SITE Association of Industry Karachi rejected the controversial Sections 37A and 37B introduced in the Finance Act, declaring that the industrial community would not tolerate such oppressive laws. SITE Association President Ahmed Azeem Alvi condemned the provisions of these laws, which granted powers to FBR officers to arrest honest taxpayers based solely on suspicion and even file FIRs.

Commercial property rent in Punjab: CAP concerned over imposition of 16pc ST
Commercial property rent in Punjab: CAP concerned over imposition of 16pc ST

Business Recorder

time09-07-2025

  • Business
  • Business Recorder

Commercial property rent in Punjab: CAP concerned over imposition of 16pc ST

LAHORE: The Chainstore Association of Pakistan (CAP), the leading representative body for the organized retail sector, has expressed deep concern over the imposition of a 16% sales tax on the rental of commercial properties in Punjab under the recently enacted Punjab Finance Act, 2025. The association warns that this new tax regime will significantly raise the cost of doing business and worsen an already fragile investment climate. Rana Tariq Mehboob, Patron-in-Chief of the Chain store Association of Pakistan, strongly criticized the imposition of a 16% sales tax on commercial property rent, calling it economically unsound and legally indefensible. He emphasized that the global tax models Pakistan claims to follow do not treat rental property as a taxable service, and such a move introduces serious implementation and legal challenges. 'Renting commercial space in Punjab has just become prohibitively expensive,' he stated. 'This tax places an unsustainable burden on already struggling retailers and entrepreneurs at a time when economic activity is under immense pressure. Instead of encouraging growth and formalization, such punitive measures risk driving legitimate, tax-compliant businesses into the informal sector.' He urged the government to reconsider this policy in favour of more balanced, transparent, and business-friendly reforms that promote investment, stability, and long-term economic resilience. Asfandyar Farrukh, Chairman of the Chainstore Association of Pakistan, echoed these concerns and highlighted the broader implications of such taxation policies on Pakistan's economic outlook. 'We are witnessing an erosion of business confidence across the retail sector,' he remarked. 'The introduction of a 16% sales tax on rental spaces is not just a financial blow — it is a signal that doing business is becoming increasingly unpredictable and risk-laden. He further emphasized that imposing additional taxes without proper consultation or impact analysis could lead to contraction in the formal retail sector, job losses, and decline in investor interest, both local and international. CAP warned that the current approach undermines the government's own stated objectives of economic revival, export enhancement, and broadening the tax base through inclusive policies. The Chainstore Association of Pakistan strongly urges the Punjab Government to immediately suspend the 16% sales tax on commercial rentals and engage in constructive dialogue with all stakeholders to develop business friendly and growth-oriented policies. Copyright Business Recorder, 2025

Retail sector: CAP voices concerns over lack of ‘meaningful' tax reforms
Retail sector: CAP voices concerns over lack of ‘meaningful' tax reforms

Business Recorder

time19-06-2025

  • Business
  • Business Recorder

Retail sector: CAP voices concerns over lack of ‘meaningful' tax reforms

LAHORE: The Chainstore Association of Pakistan (CAP) has raised significant concerns over the lack of meaningful tax reforms for the retail sector in the proposed Finance Bill 2025–26. The CAP has also warned that targeting domestic e-commerce could inadvertently harm the formal retail sector and jeopardize the growth of Pakistan's digital economy if not revised. The CAP acknowledged the government's efforts to broaden the tax base and formalize the economy. However, the association argues that inconsistent and short-sighted policies have placed disproportionate burdens on tax-compliant retailers integrated with the Federal Board of Revenue's Point of Sale (FBR-POS) system. The absence of a clear, long-term taxation roadmap, developed in consultation with stakeholders, has further deepened uncertainty within the sector. 'This year, the retail ecosystem anticipated a strategic, long-term approach in the Finance Bill,' said CAP Chairman Asfandyar Farrukh. 'Instead, we see a continuation of past practices, with our proposals to foster formal retail growth and encourage broader documentation largely overlooked.' Organized retail currently accounts for only 10% of Pakistan's retail and wholesale trade, significantly lower than the 15–20% share observed in comparable economies. Informal competition, increasing compliance burdens, and uneven enforcement continue to hinder growth, investment, and job creation in the formal retail sector. CAP Patron-in-Chief Tariq Mehboob highlighted the detrimental impact of last year's decision to eliminate the GST concession for customers of tax-compliant retailers, which has further tilted the competitive landscape in favor of informal players. 'Schemes like Tajir Dost failed due to inadequate planning and lack of stakeholder engagement,' Mehboob stated. 'There is still an opportunity to revise the Finance Bill before its finalization. Without prompt action, we risk losing another year without meaningful reform.' To encourage digital payments and economic documentation, the CAP has proposed reduced GST rates for consumers who transact digitally with retailers of any size. These rates, coupled with simplified compliance measures and built on the success of provincial incentives, would lower costs, promote formalization, and reduce reliance on cash transactions. Additionally, the CAP has recommended a fixed quarterly advance income tax regime for small retailers, payable through branchless banking and adjustable against annual filings. The association also advocates for a stable, three-to-five-year tax framework, complemented by incentives such as cashback programmes and service benefits at NADRA and passport offices, to build trust and encourage small and medium-sized enterprises (SMEs) to register. Pakistan's e-commerce sector has experienced remarkable growth, expanding by over 35% annually and empowering more than 100,000 micro and small sellers while generating jobs in technology and logistics. According to the State Bank of Pakistan, the sector facilitated over PKR 538 billion in digital payments in 2024. The CAP supports positive measures in the Finance Bill, such as the 5% digital presence levy on imported goods sold through foreign platforms like Temu and the introduction of e-commerce transaction reporting to enhance documentation. However, the CAP has expressed concern over several proposed tax compliance measures that could undermine these gains. Key concerns include blanket sales tax withholding on already documented businesses without input adjustment, mandatory sales tax registration for micro-sellers—particularly impacting youth and women entrepreneurs—and complex, multi-rate income tax withholding for platforms, payment providers, and courier services. These policies risk creating operational bottlenecks, complicating payment recovery, and increasing compliance costs across the e-commerce value chain. The CAP has called on the Ministry of Finance, the Federal Board of Revenue, and the Ministry of Commerce to suspend the implementation of these measures and engage in urgent consultations with stakeholders, including online sellers, platforms, and service providers. The association has put forward several recommendations to address these issues: limiting the 2% sales tax withholding to non-Active Taxpayer List (ATL) sellers, accepting income tax registration as sufficient for small, home-based online sellers, implementing a simplified single-rate income tax withholding of 0.25%, restructuring penalties to encourage rather than punish compliance, rationalizing provincial taxes on essential digital services, and providing a transition period of at least two to three months for e-commerce businesses to adapt. Copyright Business Recorder, 2025

Retailers push for tax reforms
Retailers push for tax reforms

Express Tribune

time01-06-2025

  • Business
  • Express Tribune

Retailers push for tax reforms

Listen to article Pakistan's organised retail sector on Friday urged the government to overhaul the current retail taxation structure in the upcoming Finance Bill 2025-26, highlighting the need for fairer policies to support compliant businesses and expand the tax base. In an appeal to Federal Minister for Finance Muhammad Aurangzeb, the Chainstore Association of Pakistan (CAP) — representing over 150 Tier-1 retail chains — called for inclusive policymaking through structured consultation with the private sector. CAP said the budget presents a key opportunity to address long-standing disparities and bring undocumented retailers into the tax net without penalising formal players. The association expressed confidence in the government's commitment to economic revival. CAP underscored the contributions of integrated retailers to employment, commerce, tax revenue, and exports, despite their small share in the overall retail sector. Currently, POS-integrated retailers contribute around 25-30% of turnover in taxes under various heads, while most of the sector remains either under-taxed or undocumented. CAP warned this imbalance has placed an unsustainable burden on documented businesses, forcing many to downsize or shut down. CAP Chairman Asfandyar Farrukh said strict enforcement actions and unresolved technical issues in the FBR-POS system have disrupted compliant retailers. The removal of GST concessions last year and the failure of the Tajir Dost Scheme due to poor planning worsened matters.

Finance Bill 2025–26: CAP urges govt to overhaul retail tax structure
Finance Bill 2025–26: CAP urges govt to overhaul retail tax structure

Business Recorder

time31-05-2025

  • Business
  • Business Recorder

Finance Bill 2025–26: CAP urges govt to overhaul retail tax structure

LAHORE: Pakistan's organized retail sector on Friday urged the government to overhaul the current retail taxation structure in the upcoming Finance Bill 2025–26, highlighting the urgent need for fairer policies to support compliant businesses and expand the tax base. In a detailed appeal to Federal Minister for Finance Muhammad Aurangzeb, the Chainstore Association of Pakistan (CAP)—the official representative body for over 150 Tier-1 retail chains—called for inclusive policy-making through structured consultation with the private sector. CAP stressed that the upcoming budget presents a critical opportunity to resolve long-standing disparities and bring undocumented retailers into the tax net without penalizing compliant players. CAP acknowledged the Finance Minister's leadership and reiterated its confidence in the government's commitment to reviving the economy. The association underscored the significant contributions of integrated retailers to employment, commerce, tax revenues, and export value chains, despite representing only a fraction of the retail and wholesale trade landscape. At present, POS-integrated retailers contribute approximately 25–30% of their turnover in taxes under various heads. Meanwhile, the vast majority of the retail sector remains either under-taxed or entirely undocumented. CAP warned that this growing imbalance has placed an unsustainable burden on documented businesses, many of whom have been forced to downsize or shut down in recent years. CAP Chairman Asfandyar Farrukh noted that strict enforcement actions and unresolved technical issues in the FBR-POS system have further disrupted operations for compliant retailers. The withdrawal of GST concessions for documented consumers last year, coupled with the failure of the Tajir Dost Scheme due to a lack of consultation and planning, has only worsened the situation. 'To prevent another setback, the Finance Bill 2025–26 must introduce bold, technology-led solutions that broaden the tax base without penalizing formal businesses,' Farrukh emphasized. To drive formalization and promote a cashless economy, CAP proposed fixed GST rates on retail sales made via digital payments 1–2% for consumer goods and 3–4% for textile and leather items. These rates should be extended to all tiers of retailers, including small and mid-sized enterprises, along with simplified compliance measures and alignment with provincial digital payment incentives. CAP maintains that such a framework will reduce costs, encourage documentation, and accelerate tax collection. The association also recommended a fixed quarterly advance income tax regime for small retailers, payable via mobile wallets and adjustable against annual income tax returns. Predictable rates for 3–5 years, coupled with incentives such as government service privileges or cash back offers, would increase voluntary compliance and build trust. To reignite consumer engagement in tax compliance, CAP urged the government to revive the FBR-POS Prize Scheme, which has been suspended since November 2022. Additionally, the association demanded transparency in the use of the over Rs1.2 billion collected through the POS Re1 per invoice fee under the IRS Common Pool Fund. Despite their large contributions, organized retailers remain restricted to just 10% of Pakistan's retail sector, compared to 15–20% in comparable regional economies. CAP warned that unchecked informal competition, coupled with rising compliance costs, continues to hamper sector growth. The association reiterated its readiness to collaborate with government institutions, including the Ministry of Commerce, FBR, SBP, CCP, and others, to support the development of a fair, digital, and growth-oriented retail tax ecosystem. A formal meeting has been requested with the Finance Minister to present CAP's proposals and assist in shaping meaningful reforms in Budget 2025–26. Copyright Business Recorder, 2025

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