IMF urges Pakistan to expand retailer registration and restrict certain transactions to tax filers
ISLAMABAD: The Federal Board of Revenue (FBR) is set to intensify efforts to bring undocumented retailers into the tax net by monitoring high-value transactions under a newly introduced retailer registration scheme, sources said.
According to officials familiar with the matter, the initiative has been developed under commitments made to the International Monetary Fund (IMF) after repeated failures by tax authorities to broaden the country’s retail tax base.
The move is aimed at identifying retailers engaged in significant commercial activities without being registered with the tax authorities or filing income tax returns.
In its latest country report on Pakistan, the IMF highlighted that persistent shortfalls in FBR tax revenues continue to reflect the risks associated with a narrow tax base. The Fund stressed the need for broadening the tax net through comprehensive revenue administration reforms.
The IMF noted that the FBR has already implemented several priority measures under its transformation plan. These include strengthening taxpayer audits through the deployment of the Compliance Risk Management (CRM) system, expanding the use of digital invoicing with the eventual goal of making it mandatory, and enhancing production monitoring mechanisms.
To promote fair and consistent treatment of taxpayers, the IMF also recommended that the FBR develop a comprehensive audit manual and audit policy. The proposed framework would centralise the audit case selection process through administrative prioritisation and enhanced monitoring of high-risk cases using the CRM system.
While acknowledging that revenue gains from these reforms are likely to materialise during fiscal year 2026-27, the IMF observed that many of the current initiatives continue to focus primarily on existing taxpayers.
The Fund emphasised that revenue administration efforts should increasingly shift towards expanding the retailer registration scheme and strengthening enforcement measures targeting undocumented economic activity.
“Revenue administration efforts need to shift toward intensifying the retailer tax registration scheme and empowering the FBR to restrict specified high-value transactions to individuals who have filed an income tax return,” the IMF recommended in its report.
The proposed restrictions on certain high-value transactions are expected to encourage unregistered retailers and individuals engaged in substantial economic activities to enter the formal tax system.
Pakistan’s retail sector has long been considered one of the least documented segments of the economy despite its significant contribution to overall economic activity. Successive governments have struggled to bring retailers into the tax net due to resistance from trader groups and challenges in enforcement.
Tax experts believe that combining digital monitoring tools with targeted restrictions on high-value transactions could improve documentation efforts, provided that the measures are implemented transparently and fairly.
The retailer registration drive is expected to form an important component of the government’s broader fiscal strategy for Budget 2026-27, aimed at increasing tax revenues and meeting commitments under the IMF-supported economic reform programme.
