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July 13, 2019

Taxation overdrive: Has the government bitten off more than it can chew?


July 13, 2019

LAHORE: Pressing ahead hard with its do-or-die tax plans that for the most part depend on overclocking its revenue collection apparatus, the government is not bowing down to business sector’s pressure; however, at the same time it is proactively reaching out to all the angry stakeholders at all levels.

It seems that the government has something up its sleeves but it is not showing its cards to ensure the businessmen acquiesce to minor changes in the taxation and documentation processes.

The ruling party in fact has succeeded in dividing the exporters and traders. We can see that the textiles leadership that had been on the forefront during the past 10 years and in the first eight months of this regime has gone into hiding.

They are still commanding respect of their members but are not addressing press conferences criticizing the government nor are they seen in the negotiations with the government. The second-tier leadership is awed by those negotiating at the other side of the table.

The same goes for traders. One group is bent upon observing strike against the documentation policies introduced in the new budget, while the other is seeking concessions for smaller traders only, preferring to stay away from agitation and strikes.

If the strike called for July 13 succeeds, the group that wants to confront the state would get a boost; however, in case of its failure the negotiators would have an upper hand.

As far as the economy is concerned the vibes coming out of markets are not encouraging. We are moving from medium to high inflation. We are also moving into low growth zone. We have wasted almost half month of July –the first month of this fiscal when we intend to collect highest ever taxes both in growth and value.

Meanwhile, All Pakistan Anjuman-e-Tajran (APAT) has said it will ensure complete shutter-down on Saturday. The traders said the imposition of unjustified 17 percent sales tax, turnover tax and computerized national identity card- (CNIC) based invoicing system had made it impossible for the community to run the businesses.

The APAT warned the government of strike for an indefinite period if the said taxes and conditions were not withdrawn by July 13.

The statement further claimed that Qaumi Tajir Ittehad, Lahore Businessmen Front of LCCI, All Pakistan Truck Trolley Owners Association, Jewelers Association, Auto Dealers Association, and all other trade bodies of the city were also going to join this countrywide strike.

Pakistan at this juncture can neither afford confrontation nor any tax relaxation. We need every penny that we can collect. To achieve this, we need markets to operate normally.

The tax collection is down and it would be manifested in this month’s collection figures when they are finalised before August.

It seems the government has opened more fronts than its capacity to handle. The International Monetary Fund (IMF) would now have to show some flexibility on government’s tax collection efforts. While there was no letdown from the government in increasing revenues but the economy is not moving fast enough to generate desired taxes.

The cement production is gradually going down because the dealers are not lifting stocks. The textile production would soon come to halt because some parts of value chain are not prepared to come into tax net.

The auto production is under severe pressure because of huge rupee devaluation and increased taxation. Electronic gadgets’ sales have not picked up to the expectation particularly that of air-conditioners because the power rates are constantly going up.

Lingering negotiations on taxation measures for so long is not in the national interest. If the government is serious in implementing its economic decisions then it should close negotiations and be prepared to face some strikes. The economy would not move ahead if we failed to confront tax evaders head on. With right and transparent policies we can rise from the ashes but if the government compromises on principles then we are bound to go down further.

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