THE government’s much-publicised fixed tax scheme for traders is already showing signs of failure. Reportedly, with barely a week left to the Sept 30 tax filing deadline, only two previously unregistered shopkeepers have opted in. With 317 traders registered under the scheme, which is meant to bring shopkeepers into the tax net, only Rs26m has been generated against a budgeted target of Rs50bn. The Tajir Dost scheme introduced earlier had similarly failed to bring traders into the system. The government has again tried to make compliance attractive by offering traders a 1pc tax on turnover, exemption from routine audits and withholding obligations, as well as relief from installing digital payment systems. The lack of response to both schemes reveals a deeper problem: traders are unwilling to enter the formal tax regime even when the state offers concessions.

Many traders believe that their political influence and collective bargaining power offer greater protection than any incentive offered by the tax authorities. Their ability to shut shops, mobilise trader bodies and exert pressure has proved useful in resisting taxation and enforcement. It is easier, in their calculation, to oppose audits and documentation than to accept even a relatively modest fixed tax. The government cannot build a broad tax base on this basis. Nor can it continue compensating for the under-taxation of influential sectors by squeezing those within the system. The contrast with the salaried class is telling. Income tax collected from salaried taxpayers rose 7.5pc to Rs91bn in July-August, an increase of Rs6.3bn over the same period last year. Real estate, meanwhile, contributed Rs28bn, down 28pc, despite expectations of stronger property activity. This is precisely why the government must stop confusing incentives with tax reform. Incentives can facilitate compliance, but they cannot substitute for credible enforcement. If traders refuse even a highly concessional regime, the state must rethink its policy and ensure enforcement. A credible tax system requires equal treatment across sectors, reliable documentation, enforceable rules and the political will to apply them.

Published in Dawn, September 24th, 2026