Tax hike, reduction in retail timings threaten businesses

Retail establishments under pressure which will lead to store closures

KARACHI:

The Pakistan Retail Business Council (PRBC), representing numerous well-known retail establishments, has expressed serious concerns over the budget announcements and discussions between the federal government and chambers and trade bodies regarding proposed increase in taxes and restrictions on retail timings.

In a letter addressed to authorities, PRBC highlighted the potential negative impact of such restrictions on the economy, employment and tax collection.

“The proposed increase in the fixed retail tax from 12% to 15% coupled with the reduction in retail timings puts severe pressure on the organised retail sector, which will result in mass store closures and a lower purchasing power of customers,” it said, adding that it would drive many documented retailers out of business.

The retail council stressed that the documented and integrated retail sector was already paying numerous taxes, duties and levies with over 40% difference compared to the undocumented, non-tax-paying sector.

These include but are not limited to income tax, sales tax, customs duties, SESSI/ PESSI, WPPF, WWF, salary tax and advertising tax.

“This huge difference scares people away from entering the tax net and instead incentivises them to stay out of the net. Ultimately, it is counterproductive and does not lead to increased revenue collection.”

With retail accounting for a substantial 18% of Pakistan’s GDP, equivalent to $62 billion out of $360 billion, any reduction in demand for local textile products would have severe consequences, it cautioned, adding that the proposed restriction to close retail establishments at 8pm could lead to 25-30% decline in revenue, resulting in sales loss of $15 billion (Rs3.5 trillion).

Moreover, according to the council, the retail sector is a major employer, directly and indirectly providing jobs to over 10 million people, which accounts for 14% of the total workforce.

“Restricting operating hours will eventually leave 3 to 4 million people unemployed.”

PRBC highlighted several key concerns that need to be addressed. Firstly, the government has not engaged with tax-paying integrated stakeholders to seek a mutually agreeable way forward.

Secondly, the decision to restrict retail timings disproportionately affects organised and tax-compliant retailers.

Published in The Express Tribune, June 17^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.