The Federal Board of Revenue (FBR) is preparing a new tax scheme aimed at small traders and shopkeepers as part of the upcoming Budget 2026-27.

The proposed initiative is designed to simplify tax procedures and encourage more businesses to join the formal economy through voluntary compliance.

According to officials, the new framework will be introduced under the Small Taxpayers Guidance System, which focuses on reducing tax-related complexities for small businesses.

The scheme is expected to target traders and shopkeepers with annual business turnover of up to Rs. 20 million.

Business owners who have been operating for at least three years and maintain a physical business location will likely qualify for the program.

Existing taxpayers may also be eligible to participate if they meet the conditions outlined in the proposed framework.

One of the key features of the scheme is simplified registration. Traders will be able to register through the FBR IRIS portal, mobile applications, or authorized tax practitioners.

The proposed system aims to make tax registration easier and more accessible for small business owners across Pakistan.

Officials say participation in the scheme will remain voluntary. However, participants will be expected to maintain transparent and accurate business records.

The proposal also includes a simplified tax structure that may offer lower tax rates compared to the standard taxation regime.

Small businesses could benefit from reduced compliance requirements and less complicated record-keeping procedures.

Under the draft proposal, some businesses may also be exempt from mandatory point-of-sale (POS) installation and advanced digital integration requirements.

The FBR believes these measures could encourage more traders to become part of the documented economy.

A risk-based audit system is another major component of the proposed scheme. Compliant taxpayers would face a lower risk of being selected for audits.

Officials say audits would generally occur only in cases involving unusual financial activity, unexplained banking transactions, or significant discrepancies in declared information.

The approach is intended to build trust between taxpayers and tax authorities while promoting voluntary compliance.

Business groups have long advocated for simpler tax procedures and reduced administrative burdens for small enterprises.

The government hopes the new framework will expand the tax base without creating excessive costs for small businesses.

Registered participants may also gain access to several benefits, including Active Taxpayer List status and reduced withholding tax rates.

Financial experts believe formal registration can improve access to banking services, loans, and other financial opportunities for small businesses.

The scheme could also support greater financial inclusion by helping traders establish documented business records.

FBR officials maintain that broadening the tax net remains a key objective of economic reform efforts.

The proposal is currently being reviewed with stakeholders before its expected presentation in the federal budget.

Any final changes will depend on government approval and feedback received during the consultation process.

If implemented, the Small Taxpayers Guidance System could become one of the most significant tax reforms for small traders and shopkeepers in Budget 2026-27.