Pakistan Mandates Digital Payments for Businesses: A Step Toward Economic Reform

In a significant move to modernize the economy and fulfill commitments to the International Monetary Fund (IMF), Pakistan has made debit and credit card payments mandatory for businesses, replacing traditional cash transactions. This landmark decision by the Federal Board of Revenue (FBR) is expected to increase transparency, improve tax collection, and align the country with global financial trends.

A Digital Transformation: What It Means for Businesses

The new regulation requires businesses, especially tier-one retailers and large enterprises, to install Point-of-Sale (POS) machines connected to the FBR’s computerized system. This initiative aims to digitize financial transactions and curb tax evasion, ensuring a more structured economic framework.

Additionally, to enforce compliance, the government is implementing CCTV surveillance to monitor business transactions. This step is designed to reduce underreporting of sales and ensure that all transactions are properly documented.

Experts Weigh In: A Welcome Change or an Overreach?

Economists and financial analysts have largely welcomed the initiative but stress the importance of smooth implementation.

• Dr. Khaqan Najeeb, a renowned economist, stated that Pakistan is now following global trends where digital payments are becoming the norm. The transition will improve documentation and financial discipline in the market.
• However, Dr. Sajid Amin warns that the move must not be perceived solely as a tax enforcement strategy. If the primary goal is just to increase the tax net, businesses may resist the change.
• Dr. Ikram-ul-Haq, a taxation specialist, pointed out an important flaw: before enforcing digitization on businesses, the government must first modernize its own financial processes. He noted that many government departments still rely on outdated bookkeeping methods for salary disbursements.
• Dr. Khalid Walid raised concerns about financial inclusion, particularly in rural areas where debit and credit card usage remains limited. He suggested that microfinance banks could play a crucial role in bridging the financial gap and helping businesses transition smoothly.

Key Features of the Digital Payment System

1. Mandatory POS Machines – Businesses must install FBR-integrated POS machines for digital transactions.
2. Automated Transaction Monitoring – The system will compile real-time data on daily, weekly, and monthly transactions.
3. Electronic Invoices Stored for Six Years – This will allow authorities to track financial records and prevent fraud.
4. Legal Action Against Non-Compliance – Businesses found tampering with digital records will face strict penalties.

Challenges & Road Ahead

While this move is a step toward modernization, the success of digital payments in Pakistan will depend on government support, infrastructure development, and financial literacy programs. The government must address concerns of small businesses and ensure that digital payment systems are accessible across all regions.

As Pakistan transitions toward a cashless economy, businesses must prepare for the new regulations by upgrading their financial infrastructure. The shift may come with challenges, but it ultimately presents an opportunity for economic growth and transparency.