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Buckling under blackmail


Feb 17, 2022
Published August 12, 2022

EDITORIAL: Two is a trend, indeed, and since the traders lobby has now repulsed three attempts in about eight years by the federal government to bring them into the tax net, and each time they’ve used the threat of shutting down and not paying their bills to have their way, it can safely be said that this particular bunch is not going to be properly taxed anytime soon. This is, effectively, blackmail, and should give the government a lot to think about.
Last year, traders paid only Rs 6 billion in taxes and hardly 5,000 of them submitted annual tax returns, even though they constitute almost 20 percent of the total economy. This speaks volumes of the FBR’s enforcement measures and is also shameful for an economy that desperately needs to increase tax revenue. Yet the traders’ leader, a certain Naeem Mir, can confidently brag as perhaps the only person to outfox three finance ministers about a matter as crucial, and as certain, as taxes; even though his success has just blown a Rs 42 billion hole in the budget.
The timing, also, could not have been worse. Does anybody really need to be reminded just how much compromise (almost) reviving the IMF (International Monetary Fund) programme has taken? Or that taxes, along with subsidies, were central to all the fuss? Traders, who make a decent living yet throw a fit when it comes to paying their fair share of taxes, ought to know that running foul of the Fund is in nobody’s interest at this extremely sensitive point; especially not theirs because it will further slow the economy down.
Finance Minister Miftah Ismail might have said with a straight face that he will still be able to squeeze about Rs 34 billion in taxes out of traders in this fiscal, but it’s an almost six-fold increase from last year, and he’s expecting to raise it with last year’s rules, so good luck with it. And good luck with selling this to the IMF because it is sure to cause some sort of complications given the global lender’s inflexible attitude of late.
It’s a sad fact that Pakistan’s salaried classes pay a lot more in taxes than wealthy traders. And even IMF’s structural adjustment, which got everything it wanted out of the government, completely missed this point. And it’s amply clear now that it will do no good to count on the government to do much about it. Especially, this one since it relies on traders themselves, more than anyone else, to vote it into power and keep it there.
With the winds of politics already blowing very strongly against it, PML-N (Pakistan Muslim League-Nawaz) was expected to do little else than buckle under this blackmail; just like the PTI (Pakistan Tehreek-e-Insaf) government before it, and its own before that one. Why do you think Maryam Nawaz tweeted about reaching some sort of compromise with traders even before the finance ministry could announce it?
All things considered, imposing taxes on their monthly electricity bills, since nothing else would work, was a good way to get the ball rolling. Alas it, too, has met the same fate as all other smart ideas before it; quite as expected. But while it is natural for the people to lament such things, the government cannot be allowed to simply throw its hands up in despair and then go on with business as usual.
If the entire tax and subsidy regimes are being overhauled, and people are being burdened to no end because of it, why must a sector that routinely earns windfalls be isolated from it? These questions will haunt the government if it does not provide quick answers, and cost it yet more political capital.
Considering the fact that it has precious little of it left, it should take these things a lot more seriously. Simply saying that it’ll still get the taxes out of them will just not do. The government will, sooner or later, have to put its muscle where its mouth is. The question however is, if not now, then when?
Copyright Business Recorder, 2022



Dec 1, 2016

Two points.

1.Pak is a consumption and import driven economy, not a production/export/savings driven one. Taxation on trade must be carefully thought of.
2. Pak govt is not necessarily the wisest when it comes to spending its tax rupees, it might be best to leave most GDP in the hand of consumers/citizens so that money is spent wisely.


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