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Express Tribune
a day 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.
Business Recorder
09-07-2025
- 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
Express Tribune
22-06-2025
- Business
- Express Tribune
Govt urged to rethink new taxes
Listen to article E-commerce and chain store strategists have demanded the government rationalise the proposed taxes on online and registered businesses in order to maintain the pace of documentation in the retail sector and promote financial inclusion in the economy. They urged the government to refrain from burdening taxpayers with additional taxes and duties to encourage the formalisation of retail and online businesses, which will promote the generation of long-term and sustainable dividends for the economy. They also called on the government to pause the immediate enforcement of these policies, and instead initiate a structured dialogue with stakeholders to co-create pragmatic and growth-friendly tax policies. Pakistan E-Commerce Association (PEA) Karachi Chapter President Shoaib Bhatti said that the proposed tax measures in the financial bill will severely risk the e-commerce sector, disrupting both established and small businesses by imposing an excessive compliance burden all at once. He urged the government to avoid imposing the additional 2% withholding sales tax on e-commerce and retail sectors, which are already paying 18% general sales taxes. In comparison, informal retail segments in major shopping centres and bazaars are not paying taxes at all, he said. Pakistan's e-commerce sector has grown over 35% annually in the past five years, with over 100,000 small online sellers active as of today, supporting the incomes of over a million people nationwide, added Bhatti. Increasing the tax burden on this segment, he said, will be tantamount to slowing down its growth and contribution to the national economy. According to estimates, the total market size of the e-commerce sector is estimated to be Rs2.2 trillion ($7.7 billion), which is still under 2% of the national GDP and up to 4% of the retail segment. Chainstore Association of Pakistan (CAP) Chairman Hasan Javed remarked that the new tax will create an imbalance between documented and undocumented retail and online segments, as one pays an overall 20% GST and the second one will pay merely 2%, hence promoting a cash economy. "Established online and chain stores are already paying 15-16% provincial taxes to the government, and an additional 5% federal levy will increase their cost of doing business. Therefore, we appeal to the provincial government to reduce the tax rate at their end," he remarked. The proposed tax measures place heavier obligations on e-commerce than on the traditional retail and wholesale sectors. Rather than encouraging formalisation, these measures could push businesses back into informality — or out of operation entirely, he said. The Finance Bill introduces multiple taxes and complex procedures across all related businesses, with no stakeholder consultation or phased rollout, which could adversely hit the sector. What's more, a number of e-commerce stores shut down in the past two years due to tough competition among players and higher logistics and operating costs. Saad Shah, CEO Ucaaz, said established e-commerce and chain stores have been highly regulated with tax compliances and equipped with payment systems, however, increasing the burden of tax and levies on these stores will not be favourable for them. He pointed out that various online and chain stores not only offer high-quality branded products to customers, but also offer them handsome discounts on products due to their efficient business models which attract footfall and generate tax revenues for the government, unlike grocery shops in major retail and wholesale markets in big cities. The e-commerce sector is developing a growing and inclusive ecosystem that also generates jobs for the youth, and provides entrepreneurial and investment opportunities for the masses. Disrupting this sector will ultimately hurt all stakeholders, stated Shah.
Business Recorder
21-06-2025
- Business
- Business Recorder
E-Commerce sector urges govt to revise proposed tax steps
KARACHI: Pakistan's E-Commerce ecosystem has urged the federal government to revise proposed tax and compliance measures announced in Finance Bill 2025-26 and initiate a structured dialogue with stakeholders to co-create practical, growth-friendly tax policies Addressing a press conference here on Friday at Karachi Press Club (KPC), representatives of the Chainstore Association of Pakistan (CAP) and the Pakistan E-Commerce Association (PEA), along with other stakeholders including freelancers, marketplaces, courier services, payment providers, and digital platforms, have urged the government to adopt practical revisions to the proposed tax and compliance measures in the Finance Bill 2025-26. On the occasion, representatives including Muhammad Zeeshan, Shoaib Bhatti, Joint Secretary CAP Bushra, Atta Bin Azad, Mahwish from Payfast, Shoaib Ahmed and others were also present. They informed that Pakistan's e-commerce sector has grown over 35 percent annually in the past five years and currently, over 100,000 micro and small online sellers are active, supporting incomes for more than a million people nationwide. The total market size is estimated at Rs 2.2 trillion or $7.7 billion with some 2 percent share in the national GDP. They said that all stakeholders is supporting fair taxation and documentation, but the proposed measures risk severely disrupting both established and small businesses by putting an extreme compliance burden all at once. 'Their design and immediate implementation will stifle digital entrepreneurship, especially among youth and women,' they added. The coalition appreciates the proposed 5 percent digital presence levy on offshore platforms like Temu and supports improved data reporting requirements of the sector. However, the gains should not be undermined by excessive and impractical tax compliance obligations. They said that Finance Bill introduces multiple taxes and complex procedures across all related businesses, with no stakeholder consultation or phased rollout. Industry leaders warn that this top-down approach mirrors the unsuccessful 'Tajir Dost' scheme, which failed due to impractical design and lack of consultation. 'Blanket 2 percent sales tax withholding, mandatory sales tax registration for all online merchants, complex income tax withholding at six different rates, penalties of up to Rs 500,000 per case on platforms, couriers, and sellers and enforcement from 1st July with no transition period are key concern,' highlighted the representatives. They recommended 2 percent sales tax withholding to non-ATL (unregistered) sellers and income tax registration for small/ home-based sellers instead of complicated sales tax registration and monthly filings. Industry leaders urged the Prime Minister, Finance Minister, Commerce Minister, and Federal Board of Revenue (FBR) to pause enforcements and initiate a structured dialogue with stakeholders to co-create practical, growth-friendly tax policies. Copyright Business Recorder, 2025
Business Recorder
19-06-2025
- 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
