ISLAMABAD: Amid a countrywide strike, talks between the traders and the government were deadlocked on Tuesday after tax authorities refused to accept demands for the withdrawal of computerised national identity card (CNIC) condition and charging a nominal fixed income tax from big traders.
The talks failed despite the mediation by former Pakistan Tahreek-e-Insaf (PTI) secretary-general Jahangir Tareen, who tried to convince both the sides to show leniency. Tareen, however, hoped that a breakthrough would be achieved on Wednesday (today).
The traders begin their two-day strike on Tuesday against tax measures introduced by the Federal Board of Revenue (FBR). The protestors wanted the abolition of the condition of CNIC on the sale of Rs50,000, cancellation of registration for sales tax and sought a fixed tax scheme.
The government that was earlier showing some flexibility had to take a firm stance after the International Monetary Fund (IMF) opposed the idea of charging fixed income tax from the traders, according to the sources in the Ministry of Finance.
There was a five-hour-long session of talks at the Q Block –the seat of Finance Ministry, which was briefly attended by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh. “I cannot accept the demands of withdrawing the CNIC condition and charging income tax on the turnover basis from medium and large-sized retailers,” FBR Chairman Shabbar Zaidi told The Express Tribune.
Zaidi, however, expressed the hope a breakthrough might be achieved on Wednesday (today). He said that he was ready to offer fixed income tax rate only for small shopkeepers. A shopkeeper doing business in a 2,000 square feet shop could not be charged under the fixed regime, he added.
Sources said that the IMF opposed the proposal to offer fixed income tax regime, which, according to the Fund, would further lessen the tax contribution by these traders.
Through the 2019-20 budget, the government made it legally binding for the industrialists to seek the CNICs from the wholesalers and distributors on the sales of over Rs50,000. The move pitched the traders and small shopkeepers against the government.
Against the decision, the traders on Tuesday started a two-day shutter-down, bringing commercial activities to a standstill across Pakistan. The strike would continue on Wednesday (today) and there was deadlock in talks, Khawaja Mohammad Shafiq, Chairman of Anjman-e-Tajran Pakistan, said. Shafiq said that the traders would not accept the CNIC condition. He added that as a compromise the traders offered the FBR chairman to defer the CNIC condition for six more months but he did not agree
The traders neither want to get income tax registration nor the sales tax registration – the two measures that are very critical for the documentation of the economy. The FBR’s tax-to-GDP ratio is only 9.9% -- the lowest in the region.
This ratio has to be increased to at least 17% in the medium term to keep the country fiscally viable. Due to a low tax base and a distortive income tax regime, the burden has been passed down all segments of the society through indirect taxes, irrespective of their capacity to pay. The share of indirect taxes in total taxes that is already high has further increased at the end of the last fiscal year.
There are only 392,000 traders that pay any type of tax and there are another three to 3.5 million traders, who are not in the tax net, Dr Hafeez Shaikh told media persons. Shaikh said that the traders were important stakeholders and the government would bring them in the tax net.
“The government needs additional revenues and it cannot overburden the existing taxpayers, therefore, people who are not in the net will have to pay taxes, said Shaikh, the Adviser to the Prime Minister on Finance.
The share of the wholesale and retail services in the national output is 18% but their share in the tax collection is a mere 0.88%. In its draft of small shopkeeper scheme, the FBR had defined a small shopkeeper as an individual, who carries out business at a premises having covered area of less than 300 square feet.
Shafiq said that the FBR also refused to accept the proposal of Rs100 million annual turnover limits for a small trader. The FBR has also backtracked on its earlier offer to exempt the traders from the audit, said Ajmal Baloch, President All Pakistan Anjman-e-Tajran.
Earlier, the FBR proposed that the small shopkeeper will pay only 2% of turnover as tax or a fixed tax of Rs20,000 to Rs40,000 whichever is higher. Against 2% tax, the traders had demanded only 0.1% turnover tax and to set the turnover limit at Rs100 million per annum for a small shopkeeper.
The FBR Chairman had also constituted a joint committee of the FBR, tax experts and the trade representative to resolve the issue but the committee too failed to break the deadlock.
Shutter down across country
Joining the countrywide protest by trade organisations, the small and medium level businessmen of Karachi, of the economic hub of the country, closed their trade centres and shops. City’s major wholesale markets were also shut.
This is the second shutdown strike of small businessmen in the PTI government, which is taking place after a three-month gap. Major shopping centres, including Jodia Bazar, wholesale clothing market on MA Jinnah Road, wholesale Pan market, Gulbahar sanitary market, Jamia Cloth Market, Sadar Bohri Bazaar, Aram Bagh furniture market, Tariq Road, Clifton, electronics and other markets in Saddar, most of Orangi Town markets, timber market, medicine market, were closed.
The traders held a rally and a sit-in on MA Jinnah Road. All City Traders leader Sharjeel Goplani said that Karachi’s businessmen will also close on October 30 against the government’s unacceptable tax policies.
President of the All Pakistan Small Traders Association, Mehmood Hamid Wadigar said that the FBR has forced the traders to shut down by creating a deadlock in the negotiations. “If the tax policies are not corrected soon, the economy will suffer irreparable damage,” he said.
Tanzim Tajran Pakistan Central Chairman Kashif Chaudhry said that during the strike they held talks with the FBR and other government authorities from 12pm to 6pm. However, the talks could not succeed therefore they decided to continue their strike on Wednesday (today).
Like other cities, Lahore too has observed almost a complete shutter-down strike. Major markets and business centres in the provincial capital remained shut on Tuesday. Apart from the wholesale market, different shopping centres also observed a partial shutter down.
Different market leaders also stage demonstration and displayed banners against the FBR, many demanding removal of its chairman. “It does not matter anymore for us whether we should open our shops or not, for us every day is a nightmare”, said Musharraf Siraj, a shopkeeper in Anakkali Bazaar.
“The government wants to implement a new tax regime in one go, and this is the point of concern for many businessmen and traders,” said Azeem Siddiqi, a wholesale dealer. “As a taxpayer, I know what are the consequences, how much burden I have to bear,” he said.
All Pakistan Anjuman-e-Tajran President Ashraf Bhatti said that the strike proved that traders would not accept the agenda of international financial institutions.
“Our demands are legitimate and this is the reason that other cities and chambers also participate in this strike,” he added.
Traders said that the future course of action will be determined by how the government treats us in the future. “The traders never said that they will not pay taxes, but we will not take the all the burden of lenders’ conditions on our shoulders,” said Bhatti.
The Balochistan Anjuman-e-Tajran on Tuesday observed a complete shutter-down strike in the province. On the call from traders’ unions, business activities in the province remained at a standstill.
Shops and markets on Quetta’s Jinnah Road, Liaquat Bazar, Abdul Sattar Road, Prince Road, Sariyab Road, Double Road, and other areas remained closed causing problems for the people seeking to buy daily commodities. Business activities in Mastung, Kalat, Chagai, Naushki, Gwadar, Turbat, Pishin, Kuchlak, Zhob, Loralai and other cities also remained suspended.
Markazi Tanzeem Tajran Khyber Pakhtunkhwa President Malik Mehr Elahi said on Tuesday that the traders's strike would continue on Wednesday (today) and warned that they would not hesitate to take to the streets if their demands were not met.
He demanded of the government to take back the taxes imposed in the budget and provide relief to the protest otherwise more protest would be staged.