Pakistan tax regulator faces backlash over PKR 200,000 cash transaction cap

Pakistan's tax collection authority, Federal Board of Revenue (FBR), is under fire after reintroducing a regulation limiting cash transactions to PKR 200,000, a move aimed at improving tax transparency and curbing undocumented trade.

While officials defend the policy as a necessary step toward a more digital and accountable economy, business groups have reacted with alarm, warning of severe repercussions for small traders.

An FBR official said the business community is overreacting. “The law wasn’t imposed overnight,” the official stated. “Parliament approved the provision. The FBR is only implementing what the legislature has passed.”

Despite the clarification, pushback has been swift and vocal. The Karachi Chamber of Commerce and Industry (KCCI) criticized the PKR 200,000 threshold as “unrealistic”, arguing that it would burden small businesses already grappling with inflation and rising operational costs. The chamber has joined calls for a nationwide strike on July 19, with the cash transaction cap listed as one of the major grievances.

FBR Chairman Rashid Mahmood Langrial defended the move during a recent Senate committee meeting, emphasizing that the decision was made through proper legislative channels. “This provision was passed by both the National Assembly and Senate Finance Committees,” Langrial said. “We are simply ensuring compliance.”

Langrial further stressed the policy’s intent to reduce undocumented cash flows and improve tax enforcement. “If we can reduce undocumented money flows, we can improve revenue collection and identify tax evaders,” he added.

Experts clarify scope and impact

To address growing concerns, tax professionals are stepping forward to clarify misconceptions. According to experts, the PKR 200,000 cap applies to business-to-business transactions, not everyday consumer purchases. They also confirmed there is no new 4% tax on cash transactions, countering widespread rumors.

Other key points include partial expense claims, where businesses can still claim up to 50% of expenses on cash transactions below PKR 200,000, and a focus on registrations.

The cash sales cap was initially introduced two years ago to monitor unregistered suppliers but was later scrapped after resistance from traders. It has now been revived under the Finance Act 2025, with clearer guidelines and a renewed focus on documentation.