Traders’ strike

The traders’ strike concluded successfully on Wednesday after talks with the government. After warning of a country-wide strike for months, the trading community managed to pull off a shutter down strike across the country on Tuesday. The targets were a range of measures designed to document their transactions. The government and traders came to an agreement to call off the strike, which means a significant backdown by the government on its taxation and documentation measures proposed for traders. The closure of urban markets came at a poor time for the government, at the same moment as the anti-government march led by the JUI-F. The coming together of five major traders’ unions was crucial to making sure the strike was successful. This meant that the traders’ backed the government into a corner to concede to some of their major demands. However, is should also be clear that the traders’ strike did not yield an absolute victory for the trading community. Many of the provisions that the government had proposed remain in place, especially the CNIC condition for purchases has not been done away with.

It remains to be seen if the entire traders’ community is happy with the outcome of the talks – which do raise fears that there is an element of capitulation on both sides. No doubt traders need to be brought into the formal tax net, but many of the measures proposed remain indirect. The CNIC condition effectively means that many customers are no longer making purchases, which are crucial to sustaining traders. Even now, the sales tax registration requirement has been set on the basis of the electricity bill paid by a certain trader, instead of their income. Moreover, shops smaller than 1,000 square feet will be exempt from sales tax. Traders have agreed to a tax of 0.5 percent on net turnover, which is less than the 1.5 percent set by the government, but does not represent an income tax. Instead, any such measure should be applied on net profits to avoid it becoming a tax on end consumers and feeling like another version of sales tax. Traders reporting over Rs100 million in profits will be exempt from withholding tax, which seems like an attempt to induce high revenue traders to report accurate profits. Turnover tax might be reduced for low-profit making sectors, such as warehousing. Many of the traders’ leadership were critical of the IMF programme – and the government knows it cannot expect an easy ride in the future. The temporary agreement can be presented as a win-win for both sides, but it remains to be seen if traders will comply. We have seen this happen before with little effect on real compliance. This chapter may not be closed yet.