Pakistan Retailers Push for Digital Payments to Boost Tax Revenue

The Chainstore Association of Pakistan urges authorities to prioritize digital payments in retail to improve tax generation and documentation. CAP proposes slashing the General Sales Tax rate to 5% for digital transactions to incentivize adoption.

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Pakistan Retailers Push for Digital Payments to Boost Tax Revenue

Pakistan Retailers Push for Digital Payments to Boost Tax Revenue

The Chainstore Association of Pakistan (CAP) is urging authorities to prioritize the adoption ofdigital paymentsin the retail sector to improve tax generation and documentation. CAP Chairman Rana Tariq Mehboob and Co-founder Asfandyar Farrukh expressed concern over the slow progress in documenting retail trade, which stems from stagnation in FBR-POS integration and the 'Tajir Dost' drive.

Why this matters: The adoption of digital payments in Pakistan's retail sector has significant implications for the country's economy, as it can lead to increased tax revenue and improved transparency. Moreover, it can also pave the way for sustainable economic growth by promoting a culture of digital transactions.

Retailers believe that promoting digital payments can bring significant benefits to the sector, including enhanced transparency, reduced cash handling costs and risks, and simplified tax compliance. They argue that a comprehensive policy framework with tax incentives is needed to drive faster adoption of digital payments among businesses and consumers.

To incentivize more retailers to embrace digital payments, Farrukh proposed slashing the General Sales Tax (GST) rate to 5% for all retail transactions made through digital payment methods. "A 5% GST rate on Rs2 trillion could generate Rs100 billion in indirect taxes and additional direct taxes," he stated.

The retail sector in Pakistan faces challenges in tax documentation, with an estimated 90% of retail trade currently undocumented and undertaxed. The sector's contribution to the annual GDP is estimated to be over Rs12 trillion. Mehboob believes that documenting business turnovers through digital payments will lead to improved sales tax generation and enhanced income tax collection over time.

CAP is urging policymakers to take quick and decisive action through a collaborative approach with key players in the ecosystem. They stress the need to accelerate the adoption of technology, streamline tax procedures, and enact policies that fast-track digital payment solutions. Retailers believe these measures can increase their contribution to the annual GDP, with the potential to bring the share of digital payments up to 50% of the retail trade's contribution.

As Pakistan moves towards a digital economy, the adoption of digital payments in the retail sector can play a vital role in improving tax compliance, generating revenue, and promoting transparency. The government and relevant parties must work together to create an enabling environment that encourages the widespread use of digital payment solutions, unlocking the potential of the retail sector and paving the way for sustainable economic growth in Pakistan.

Key Takeaways

  • Pakistan's retail sector urges adoption of digital payments to improve tax generation and documentation.
  • Digital payments can increase tax revenue, promote transparency, and drive sustainable economic growth.
  • 90% of Pakistan's retail trade is currently undocumented and undertaxed, with a potential Rs12 trillion contribution to GDP.
  • Slashing GST rate to 5% for digital transactions could generate Rs100 billion in indirect taxes.
  • Accelerating digital payment adoption can increase retail sector's contribution to GDP and promote transparency.