Imtiaz Naveed
The nationwide strike staged by traders from various parts of the country on Wednesday, in solidarity with traders’ associations and some political parties, is a significant event. It was a protest against the escalating electricity bills and newly imposed taxes on shop owners. The introduction of the ‘Tajir Dost Scheme’ by the Federal Board of Revenue (FBR) to bring traders and wholesalers into the tax net sparked fierce opposition. The Markazi Tanzeem-e-Tajran Pakistan declared their continued resistance against the ‘Tajir Dost Scheme’ and other government economic policies that significantly impact the trader community. They announced the consideration of a three-day shutter-down strike followed by a nationwide wheel-jam strike if their demands were not met. Moreover, the traders’ community also threatened to initiate an indefinite nationwide shutter-down strike if their concerns were not addressed. In response, the government stood firm on its position and pledged to bring traders into the tax structure, underlining the urgency and importance of the issue.
This standoff is not an isolated incident, but a manifestation of a persistent issue within Pakistan’s economic framework. The failure of successive governments to enforce a just and comprehensive tax system that encompasses all sectors of the economy is a historical problem. The ability of the retail sector to mobilize against tax reforms is not a new occurrence, as various governments since 1998 have attempted – and failed – to bring traders into the tax net. Despite efforts during times of strong political mandates or military rule, the influential trader lobbies have consistently thwarted these initiatives.
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This historical context provides a deeper understanding of the problem and its implications. Attempts to tax the retail sector under different administrations, from Nawaz Sharif’s government to Pervez Musharraf’s military regime, and more recently under the PTI government and the earlier PDM government, have encountered fierce resistance, leading to compromises that uphold the existing status quo. This pattern of resistance has significant implications for Pakistan’s economy. Official data shows that only 270,000 out of 3.1 million retailers filed tax returns in the last tax year, contributing a mere Rs34 billion to the national treasury. In contrast, the salaried class, unable to evade taxes due to automatic deductions, contributed Rs375 billion during the same period. With rising inflation, increased electricity tariffs, and stagnant wages, the financial burden on the salaried class continues to intensify, reflecting an unfair and unsustainable situation.
Financial experts argue that the government’s continued dependence on taxing the salaried class, while influential sectors such as retail, agriculture, and real estate evade their equitable contribution, sets the stage for economic instability. The ongoing protests by traders exemplify the influence these sectors wield over the government, utilizing strikes and economic disruptions to safeguard their interests at the expense of broader fiscal reforms. The government’s response to this challenge is crucial and will serve as a litmus test for its dedication to authentic economic reform. Despite understandable skepticism rooted in past failures, the government must display firm determination to integrate the retail sector into the tax net.
The stakes are too high to allow a repetition of history, where powerful lobbies shape tax policy to the detriment of national interests. Pakistan’s economic future hinges on expanding the tax base and ensuring that all sectors fulfill their fair share of contributions. This issue transcends mere fiscal policy; rather, it embodies economic justice. The government must resist the pressure to concede and instead take decisive action to terminate the era of selective taxation. The role of the government in addressing the issue is crucial, as it highlights the need for decisive action and reform. The time has come to establish a tax system that is fair, impartial, and encompassing of all sectors, guaranteeing equitable distribution of the responsibility to support the nation’s economy across the board, rather than burdening only the voiceless salaried class.
