Taxing traders

Published March 25, 2024

PAKISTAN is once again making an attempt to get the slippery trade sector into the tax net. Will it finally succeed? That really is the only question worth asking at the moment. With the country already massively indebted and sources of funding beginning to run dry, it is clear that it cannot continue to borrow blindly to finance its expenditures. Those already in the tax net, especially the salaried class, have mostly been squeezed dry, and there is growing pressure on the government to now go after those who have traditionally not contributed their fair share to the kitty. The imbalance is staggering — some would say criminal. According to figures reported in local media, compared to the Rs217bn extracted from the salaried class in taxes over the eight months since July, retail contributed only Rs11.2bn. The status quo cannot be sustained: despite the myriad economic challenges faced by the country for the past two years now, the trade sector has gotten away with paying almost nothing. Meanwhile, the salaried class has been forced to endure the double whammy of being taxed at source on income and having their purchasing power eroded by runaway inflation.

Successive governments have had an inexcusably lax attitude when it comes to taxing traders and shopkeepers. This would likely have continued unchanged had the country been experiencing slightly better economic conditions. However, the government now has few options other than to finally start making the tax system more equitable for all. It has been reported that the SIFC will be monitoring the progress of the announced compulsory registration scheme for traders. Let us see whether its oversight is enough to cow the trade sector into getting in line. It is unlikely to be an easy transition. The economy is tight for everyone, including traders. Even in better times, they managed to cause considerable trouble every time such measures were implemented and invariably managed to have them overturned. The resistance will be tougher now, given how difficult the conditions are. However, the government must persist. The already taxed are at a breaking point. The unfair burden placed on them is a major reason why the deterioration of Pakistan’s economic conditions has been so rapid. More sources of revenue need to be unlocked, or the dystopia in the economic order will continue to wreak havoc.

Published in Dawn, March 25th, 2024

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