THE call for a nationwide strike on July 19 by leading trade associations against tax enforcement and compliance measures introduced in the FY26 budget highlights strong resistance from the trading class to become part of the documented economy and pay their due.
The call is backed by major chambers of commerce and industry, as well as other leading trade bodies. For what it’s worth, the Federation of Pakistan Chambers of Commerce and Industry too has threatened to join the protest unless the government revokes what its leaders have termed ‘anti-business budgetary measures’. The opposition to the new measures cuts across the political divide among traders, underlining a wider consensus against documentation.
The contested provisions of the budget include powers of FBR officials to arrest taxpayers on allegations of fraud, depute taxmen at factory premises to check evasion, implement digital invoicing and e-billing, and penalise the use of cash for over Rs200,000 worth of business transactions, and other similar steps the government has taken to discourage the use of cash in transactions and check tax fraud.
Business leaders say those measures are impractical and unjustified, and will “push the businesses into informal economy”. According to them, harsh punitive actions had been introduced unilaterally, triggering widespread fear among traders, SMEs and manufacturers. None of the arguments offered by the protesting trade bodies and their leaders against new tax enforcement measures have a leg to stand on. Indeed, some of the measures introduced in the Finance Bill to raise taxes worth Rs389bn through enforcement may appear quite harsh.
However, there is no denying the utility of such measures in a country where the majority of businesses and wealthy individuals deliberately stay out of the tax net and short file returns to evade taxes. Pakistan is not the first nation to adopt such enforcement tactics in order to increase their low tax-to-GDP ratios. A major factor behind Pakistan’s abysmally low tax-to-GDP ratio of 10pc — one of the lowest in the region and the world — is unwillingness of most businesses and high-net worth individuals to become part of the tax net and pay their due.
It is, therefore, crucial to support any government action that aims at broadening the tax base, and punishes evasion and fraud in order to reduce the burden on compliant salaried individuals and corporate businesses. The government so far has resisted the traders opposed to enforcement measures. But it has a very poor track record of staying the course of tough decisions that affect the ruling party’s core political base. Given its past record of buckling under pressure from politically influential trader lobbies, there is concern that backing down now would derail tax reform efforts for years to come.
Published in Dawn, July 14th, 2025
