Aasaan tax scheme: when easy becomes difficult

EDITORIAL: Released data indicates that the Aasaan tax scheme has failed to take off, like its precursor Taajir Dost scheme of 2024, with only 222 instead of the hoped for one million traders having registered.

The objective of the two schemes was to bring traders within the ambit of the tax net which clearly has not been successful. Be that as it may, there were some differences between the two schemes though a refinement of the Aasaan scheme was clearly not sufficient to lure more traders to participate: (i) the mechanism of Taajir Dost scheme was a monthly advance minimum tax based on electricity bills and commercial valuation of property against the Aasaan scheme’s flat one percent turnover tax on annual sales or a minimum of 25,000 rupees; (ii) a monthly regular and advance statement while the Aasaan scheme boasted simplified local language form; (iii) Taajir Dost scheme envisaged 25 percent discount for lump sum or early payment and 50 percent rebate for new filers while the prevailing scheme envisages audit exemption, point of sale exemption and a QR-coded protection against random FBR inspections; and (iv) the Taajir Dost scheme faced concerted heavy resistance from traders, a feature also apparent in the 2026 scheme, though the FBR is clearly relying on strict enforcement measures and threatens utility cut-offs for non-compliance.

There is evidence that the big traders/shopkeepers have already registered which may explain the Aasaan scheme’s inclusion of only those with an annual turnover of 200 million rupees, or 20 crore rupees with an exemption from withholding income tax deduction and no requirement for a point of sale.

The authorities in the third review Memorandum of Economic and Financial Policies document under the ongoing International Monetary Fund (IMF) programme dated May 2026 noted that “as of March 2026 the Federal Board of Revenue has introduced a new audit workflow under which all audit cases will be high risk cases identified through CRM (training more than 150 officers in its use). Local tax commissioners will assign the cases to either existing field officers or newly hired auditors.

The FBR has hired 431 auditors by end-March 2026 and will hire an additional 396 by end-June 2026.” It is unclear whether the number of auditors will be enough to ensure compliance by millions of traders who are at present operating outside the tax framework.

The pressure to implement this scheme comes from the IMF’s appraisal in the third review: “consolidation progress so far has relied primarily on increasing revenue from the formal sector.” The authorities should scale up efforts to broaden the tax base in the undertaxed sectors by strengthening revenue administration, which would also create space to address distortions in the existing tax policy design and support long-term growth.

Pakistan’s tax-to-GDP ratio remains one of the lowest in the region, which continues to be a source of concern for the IMF.

While the Fund acknowledges that the revenue growth since 2022 — achieved under extremely harsh, upfront IMF conditions — has been higher than in peer countries, the ratio only reached 12.3 percent of GDP in 2025. This figure, which sits below the 25th percentile of peer countries, includes the petroleum levy (which is not collected by the Federal Board of Revenue) as well as provincial taxes; FBR collections alone constituted only 10.6 percent of GDP. Furthermore, in fiscal year 2025–26, the tax-to-GDP ratio declined to 10.3 percent, a drop undoubtedly caused by the Middle East crisis.

Needless to say, there is an urgent need to raise revenue collections; however, one would hope that a more balanced tax framework will be developed. As noted by the Fund, the FBR’s 2025 Tax Expenditure report estimates that around 1.2 percent of GDP in various tax exemptions remains in place, notably on sales of residential property and certain foods.

Furthermore, sales tax compliance could be increased through production monitoring. While this has been successfully carried out in three subsectors—notably sugar, cement, and fertilizers—it came at the expense of hapless consumers, as the costs were passed on entirely to end users.

Compliance could also be improved through the widespread adoption of digital invoicing, which currently remains limited to large market players, and the FBR retailer registration program, which, as noted earlier, has yielded only 222 registrations.

Copyright Business Recorder, 2026