Pakistan Considers Restricting Cash Transactions Above Rs. 10,000 at Retail Outlets

Pakistan Considers Restricting Cash Transactions Above Rs. 10,000 at Retail Outlets

In an effort to promote the documentation of the economy, the government of Pakistan is contemplating imposing restrictions on cash transactions exceeding Rs. 10,000 at retail outlets.

This initiative is being considered based on the recommendations put forth by the Reform and Revenue Mobilization Commission (RRMC), which was established by the Pakistani Finance Minister.

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The commission has highlighted that while cash transactions play a crucial role in Pakistan’s economy, they also have inherent drawbacks such as tax evasion, corruption, and money laundering.

To foster transparency and accountability within the retail sector, the proposal suggests imposing limits on cash transactions. For instance, it is recommended that transactions exceeding a certain threshold, such as PKR 10,000 or Rs. 5,000, should not be permitted at retail outlets and food retail establishments/restaurants.

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Instead, non-cash payment methods like debit/credit cards, mobile payments, or other electronic means should be encouraged. To facilitate this transition, retail outlets would be required to install Point of Sale (POS) machines capable of accepting non-cash transactions. Additionally, the government should incentivize retailers to adopt electronic payment systems.

By imposing restrictions on cash transactions and promoting electronic payments, transparency and accountability can be enhanced within the retail sector. All transactions would be recorded and traceable, minimizing the likelihood of tax evasion and illicit activities. Furthermore, this approach would encourage the utilization of banking services and contribute to the promotion of financial inclusion.

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The government has yet to make a final decision on this matter. However, if the proposal is approved, it would represent a significant step towards bringing the informal economy within the tax net and promoting transparency in Pakistan’s economy.

Pros of restricting cash transactions above Rs. 10,000 at retail outlets:

Reduction in tax evasion and corruption.

Increased difficulty for criminals to launder money.

Promotion of more efficient and secure electronic payment methods.

Inclusion of the informal economy in the tax system.

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Cons of restricting cash transactions above Rs. 10,000 at retail outlets:

Potential inconvenience for some consumers, particularly those without access to electronic payment methods.

Possible increase in the cost of doing business for retailers.

Potential impact on economic growth.

The decision of whether to restrict cash transactions above Rs. 10,000 at retail outlets in Pakistan involves careful consideration of the pros and cons. The government must weigh the benefits and drawbacks before reaching a final determination.