One step forward, two steps back

LAHORE: Public pressure works in Pakistan because even the most needed revenue measures are opposed not only by the affected segment but by the entire opposition. Every political party in power wants to document traders and oppose them when in opposition.

There is a dire need that all political forces come on one page to impose globally acknowledged measures for strengthening revenues. All measures should be supported that curb smuggling, under-filing, under-invoicing, or tax evasion.

We all must work together for sustained economic growth that comes with transparency, merit-based appointments, and fair taxation.

For a start we must pay attention to differences or no differences on traders’ affairs. The traders have avoided proper documentation since 1987. The PML (J) that was in power in Pakistan announced to bring traders under value added tax (VAT) regime. The provincial government of the party in Punjab opposed the move and succeeded in the withdrawal of VAT.

Succeeding PPP government led by Benazir Bhutto again tried to impose VAT on pressure from the IMF, but this move was thwarted by Nawaz Sharif who was in opposition. When PML-N succeeded PPP, it also made hectic efforts to impose VAT, but backed out in favour of nominal fixed tax without any documentation.

The PML-N had to retreat because it feared losing its main vote bank (traders) to PPP. Even the military regime of Musharraf despite its power failed to document the traders that staged about a month of shutter down strike throughout the country.

It is a matter of grave concern that traders having 16 percent weight in the GDP of Pakistan do not contribute to even 4 percent of the tax revenues. As a way out, the previous PTI government (that also failed to impose VAT) came up with the idea of bringing the large grocers and retail stores by installing point of sales machines directly connected with the Federal Board of Revenue (FBR) server.

All transactions from POS machines are duly recorded in FBR. This experiment was highly successful as tax collection through these machines increased revenues from each grocer’s outlet.

The FBR intended to bring all retailers under the POS regime. There was a stiff resistance by the small and medium traders.

It was under this context that Finance Minister Miftah Ismael came up with the idea of collecting a fixed tax from small and medium traders through monthly power bills.

The traders feeling the threat of full exposure under the POS regime initially welcomed the move.

Traders were required to pay Rs3,000 to Rs10,000 per month depending on the volume of their trade. This was a good move to facilitate the traders in paying their yearly tax in 12 monthly instalments.

When the amount was added in the power bills for the first time, traders started protesting. The political leadership of PML-N pressured the finance minister to withdraw this tax to gain popularity among traders.

Withdrawal would deprive the exchequer of expected revenue of Rs30 billion. The most disgusting aspect in this regard is that the government has decided to make up for this revenue loss by increasing existing tax rates or levying new taxes. The traders would enjoy life without paying due taxes.