Islamabad: Pakistani traders went on a nationwide strike on Saturday disrupting business activities to protest against new taxes, inflation and government’s new drive to document commercial activity.
There was a mixed response to the strike as one section of the traders in Karachi, Lahore and Islamabad promptly responded to the call by All Pakistan Traders Associations (APTA).
However, many businesses remained open as the main chambers of commerce and industry did not support the call.
“All Pakistan Anjumn-e-Tajran will observe the countrywide shutter-down strike from Karachi to Khyber-Pakhtunkhwa and Kashmir to Gwadar in protest of unfair taxes imposed by the federal government in budget 2019-20,” APTA General Secretary Naeem Mir had announced. The union, he said, is willing to hold constructive talks with the government to resolve the issues.
However, “If the government does not agree to our terms, then protest is the only way forward”, he said adding that the traders would not file their tax returns until demands are met.
In Karachi, the country’s main commercial city, around 80 per cent of markets dealing in bulk goods were closed, said Atiq Mir, president of the All Karachi Traders Alliance, which represents hundreds of markets in the city.
“Government policies have created mistrust in trade and industry,” said Mir, who added that traders were already struggling with corrupt tax officials demanding bribes.
Similar strikes were called in other big business centres including the eastern city of Lahore, Rawalpindi, near the capital Islamabad, and Multan, home to a celebrated ceramics industry.
Not all business associations joined the strike but the move underlines the pressure facing Prime Minister Imran Khan’s government, which came to power last year promising millions of new jobs and welfare measures to help the poor.
Instead, like so many of its predecessors, it is having to impose tough austerity measures having been forced to turn to the IMF for Pakistan’s 13th bailout since the late 1980s.
In Karachi, calm prevailed around the main electronics market in the old city that would normally be bustling on a Saturday with traders selling everything from mobile phones to televisions, refrigerators and air conditioners.
A popular textiles market on Tariq Road in another part of the city was also closed as traders, already struggling to attract customers hit by a sliding rupee and inflation running at around 9 per cent, shut up shop for the day.
Under the IMF bailout, signed this month, Pakistan is under heavy pressure to boost its tax revenues to plug a fiscal deficit which has ballooned to around 7 per cent of its gross domestic product, as well as avert a looming balance of payments crisis.
The South Asian country has long suffered from a weak tax base, with only about 1 per cent of its 208 million population filing income tax returns and key industrial sectors dominated by powerful lobbies that pay little or no tax.
Tracking tax evaders
Among the measures which have roused the anger of traders is a new rule that would require customers buying items worth Rs50,000 ($315, Dh1,156)) or over to produce identity documents, a move intended to help authorities to track tax evaders.
“The new condition of the national identity card on purchases of Rs50,000 or more has created harassment among the people,” Mir said.
Under the measures agreed with the IMF, the government has also agreed to close loopholes and preferential rates in sales tax on sugar, steel, edible oils and medium and large retailers, hitting many businesses.
“We want zero tax on small retailers. Sales tax should be limited to the manufacturing sector,” Mir said.
The strike, which follows isolated protests by traders this month, was called after the government refused to agree to the traders’ demands to abandon its tax plans.
Which cities observed the strike?
In Islamabad, business activities remained partially suspended in areas including Aapbara, Jinnah Super, G-10, F-11 Markaz, Melody Market, and Sitara Market. Major markets in Pakistan’s commercial hub, Karachi, observed a shutter-down strike.
The strongest response was witnessed in Punjab province where businesses were partially closed in Lahore, Rawalpindi, Gujarat, Faisalabad, Multan, Muzaffargarh, Dera Ghazi Khan and Sahiwal. The Khyber Pakhtunkhwa also joined the strike call.
What are the main demands of the traders?
The major demands of the traders include withdrawal of the condition of computerised national identity card (CNIC) of buyers of factory production, remove 17 per cent value-added tax on traders and restore the old system of zero-rated tax facility for five major export sectors i.e. textile, leather, carpets, sports goods and surgical goods.
“There are a number of unresolved issues, from increase in the bracket of taxable income to the mandatory procurement of national identity cards from customers conducting transactions worth Rs50,000 or above,” said Atiq Mir, chairman All Karachi Traders Alliance. The “traders have been compelled to take this drastic action” due to increased sales tax, he said.
Traders also complained that under the new system they would have to file three statements including yearly income tax, withholding tax and monthly sales tax, for which they would have to hire new staff to manage records and employ services of accountants and tax lawyers.
Critics, however, claim the strike is an attempt by traders to escape the taxes and maintain the status quo. Economist Shahrukh Wani said the “retailers and traders are an incredibly organised block which has allowed them to consistently, and often successfully, oppose expansion of taxes” adding that “they need to be taxed.”
On social media too, citizens urged the government not to bow down to business community pressure and must bring them into the tax net and document the economy.
Government not to compromise on CNIC condition
In a press conference before the strike call, Federal Board of Revenue (FBR) Chairman Shabbar Zaidi said that they would not compromise on two issues.
“The government would not back out from CNIC condition and withdrawal of zero-rating facility for five-export oriented sectors” to bring the businesses into tax net, he said.
The lack of central leadership of traders is impeding effective negotiations with them, he shared.
Trade experts urge both sides to show flexibility
Lahore Chamber of Commerce and Industry has urged the government to immediately resolve the issues of the business community as they are the backbone of the economy.
LCCI Acting President, Khawaja Shahzad Nasir, said the economic issues created in 10 years couldn’t be resolved in a month.
“All issues can be resolved through better communication and some flexibility so that the full burden of documentation could be spread over a period of time.”
- with inputs from Reuters