After the failure of the trader-friendly Tajir Dost scheme, Pakistan has rolled out a strict new strategy to boost tax collection from the retail sector, under mounting pressure from the International Monetary Fund (IMF) to reduce the cash economy and accelerate trader documentation.

According to official documents, the IMF has demanded urgent steps to curb the cash-based retail economy and speed up the registration of wholesale and retail traders.

The global lender has linked these measures to Pakistan’s broader economic reform agenda, stressing that improved documentation is essential for sustainable revenue growth.

Ambitious tax targets set

The government has set aggressive revenue targets for the retail and business sectors. A tax collection target of Rs517 billion has been set from traders by March 2026, while Rs707 billion in income tax is to be collected from big retailers by June 2026.

These targets form part of the Federal Board of Revenue’s (FBR) revised annual tax collection goal of Rs13,979 billion.

FBR documents confirm that non-filer retailers will face fines and legal action. Authorities have decided to significantly increase pressure on non-registered traders while offering incentives and facilities to those who comply.

Retailers who fail to enter the tax net may also face enforcement measures under existing tax laws.

Digital receipts, POS systems mandatory

To boost sales tax collection, the government has made digital receipts and Point of Sale (POS) systems mandatory for retailers.

A digital invoicing system will become compulsory for traders with an annual turnover of Rs500 million by June 2026. Currently, POS systems are installed at 38% of large retailers, with a target to cover 40,000 big retailers within the next two years.

Under the new strategy, retailers will be monitored using bank accounts and utility bills, allowing authorities to identify tax evasion more effectively.

Documents also reveal a proposal to disconnect electricity and gas connections of shopkeepers who fail to pay taxes, signaling a tougher enforcement phase ahead.

The FBR has accelerated field operations and survey processes to identify undocumented businesses. Special efforts are underway to detect traders who understate taxable income despite owning significant assets.

At the same time, remote monitoring systems have been activated in sectors such as cement and sugar to prevent revenue leakage.

Push to expand tax return filers

The government plans to add one million new income tax filers by June 2026, increasing the total number of annual returns from 5.2 million to 7 million.

This expansion is considered a core pillar of the IMF-backed reform agenda aimed at broadening the tax base.

The IMF has also emphasized improving provincial tax collections. Provincial governments are now expected to collect Rs785 billion by March 2026, with the target rising to Rs1,190 billion by June 2026.

Additionally, the IMF has imposed a condition requiring Pakistan to limit the buildup of tax refund arrears.

After the collapse of the Tajir Dost scheme, which relied on voluntary compliance, the government has clearly shifted toward enforcement-led reforms.

Officials say reducing the cash economy, expanding documentation, and enforcing digital systems are now unavoidable steps to stabilize Pakistan’s finances and meet IMF commitments.