Tajir Dost Scheme: How important this scheme is for traders?

KARACHI: In a move to bring local traders under the ambit of taxation, the Federal Board of Revenue (FBR) recently launched ‘Tajir Dost Scheme’, which has been rejected by the traders’ community in Pakistan.

Businessman community in the country has voiced discontent, stating that the scheme’s introduction was “completely inappropriate” and deviates from established procedures.

Economist Dr. Khaqan Najeeb shared his insights during an interview on ARY News’ program, stating that a similar initiative was proposed during the tenure of former Prime Minister Shaukat Aziz but was met with strong opposition from traders, leading to widespread strikes nationwide.

He added that the currently ruling government is attempting a similar approach, which has raised eyebrows among the business community.

The economist during the interview pointed out the disparity in Pakistan’s tax system, revealing that out of the 3,200,000 to 3,500,000 businessmen only 300,000 are registered in FBR, and only 150,000 are regular income tax payers.

READ: Tajir Dost Scheme will not be rolled back: FBR chairman

He also noted that among the 3,200,000 unregistered businesses that were supposed to be brought into the tax net, only 60,000 have registered and 200 paid taxes so far.

He criticized the government’s tax formula, suggesting that while flexibility could be introduced, imposing a fixed tax instead of a turnover-based tax might reduce resistance from the traders.

He stressed the need to include the wholesale and agricultural sectors in the tax net, warning that failure to do so could force the country to seek further loans to sustain the economy.

Responding to a question, Dr. Najeeb said that the government have to take all the stakeholders on board and address their issues, adding that, “Unfortunately, in Pakistan, the transaction of Rs 9,000 billion is done in the form of cash, which is called Non-Banking Cash and Circulation (CIC).

Talking about regarding Pakistan’s credit rating, Dr Najeeb remarked that despite a recent upgrade in rating of Pakistan by Moody’s, the country remains in a high-risk category, far from the investment grade.

He acknowledged that while the upgrade might offer some economic support, it is insufficient to significantly alter the financial landscape.

It should be noted here that the Tajir Dost Scheme, launched in March 2024, is a voluntary tax collection initiative aimed at integrating unregistered businesses into the existing tax system of Pakistan, as mandated by the International Monetary Fund (IMF).

The scheme is expected to generate Rs 400 to 500 billion in national exchequer annually.

The FBR has urged all unregistered wholesalers, retailers, dealers, and shopkeepers to register under the scheme by April 30, 2024, stressing that re-registration is unnecessary.