E-commerce and chain store strategists have issued a strong appeal to the government, demanding the rationalization of proposed taxes on online and registered businesses. They warn that the current tax proposals risk stifling the pace of documentation in the retail sector and hindering financial inclusion, rather than promoting it.
Industry representatives urged the government to refrain from imposing additional taxes and duties on already compliant taxpayers. Their core argument is that encouraging the formalization of retail and online businesses, through pragmatic policies, is essential for generating long-term and sustainable dividends for the economy. They have also called for an immediate pause on the enforcement of these new policies, advocating instead for a structured dialogue with stakeholders to co-create growth-friendly tax frameworks.
“Excessive Compliance Burden” Threatens E-commerce Growth
Shoaib Bhatti, President of the Pakistan E-Commerce Association (PEA) Karachi Chapter, stated that the proposed tax measures in the Finance Bill pose a severe risk to the e-commerce sector. He warned that they could disrupt both established platforms and small online businesses by imposing an “excessive compliance burden all at once.”
Bhatti specifically urged the government to avoid implementing the additional 2% withholding sales tax on e-commerce and retail sectors, which are already subject to an 18% General Sales Tax (GST). He highlighted the stark contrast with informal retail segments in major shopping centers and bazaars, which often operate without paying any taxes at all.
According to Bhatti, Pakistan’s e-commerce sector has demonstrated remarkable growth, expanding over 35% annually in the past five years. With over 100,000 active small online sellers supporting the incomes of over a million people nationwide, he argued that increasing the tax burden on this segment would effectively slow its growth and contribution to the national economy. Estimates suggest the total market size of the e-commerce sector is around Rs2.2 trillion ($7.7 billion), representing a small but growing portion of the national GDP (under 2%) and up to 4% of the retail segment.
Imbalance Between Formal and Informal Sectors
Hasan Javed, Chairman of the Chainstore Association of Pakistan (CAP), remarked that the new tax measures will create a detrimental imbalance between documented and undocumented retail and online segments. He noted that while formal businesses pay an overall 20% GST (18% federal plus provincial taxes), the proposed additional 2% further burdens them, potentially promoting a cash economy as businesses seek to avoid compliance.
“Established online and chain stores are already paying 15-16% provincial taxes to the government, and an additional 5% federal levy will increase their cost of doing business,” Javed stated. He appealed to provincial governments to consider reducing their tax rates. He further emphasized that the proposed measures place heavier obligations on e-commerce than on traditional retail and wholesale sectors, warning that instead of encouraging formalization, these measures could push businesses back into informality, or even force them out of operation entirely.
The industry leaders collectively expressed concern that the Finance Bill introduces multiple taxes and complex procedures across all related businesses without prior stakeholder consultation or a phased rollout. This abrupt implementation, they argue, could severely impact the sector, especially given that many e-commerce stores have already shut down in the past two years due to tough competition and rising logistics and operating costs.
Saad Shah, CEO of Ucaaz, highlighted that established e-commerce and chain stores are highly regulated, compliant with tax laws, and equipped with payment systems. He warned that increasing their tax and levy burden would not be favorable. Shah pointed out that these online and chain stores provide high-quality branded products and offer discounts due to efficient business models, attracting customers and generating tax revenues for the government, unlike many informal grocery shops in major retail and wholesale markets. He concluded that disrupting the e-commerce sector, which fosters a growing and inclusive ecosystem and generates jobs and entrepreneurial opportunities, would ultimately harm all stakeholders.
