Almost all industries and traders in the country have started resisting taxation measures of the Pakistan Tehreek-i-Insaf (PTI) government. It has set an ambitious revenue target of Rs5,555b for the current fiscal year, which is not only difficult to achieve but the government will also have to face stiff resistance from businesspeople, who threatened to go on strike for an indefinite period.
Inflation is projected to be in the range of 11pc and 13pc on average in the next year, according to budget documents, which would further aggravate problems for the common people. People are already perturbed by rising prices of essentials and high rates of taxes on their income. The government’s plan to increase its revenue by at least 20pc from the last year’s target has overburdened the salaried class and businesspeople. It appears the government will have to face stiff confrontation from industries and businesses, which are not willing to pay extra taxes.
Almost 700 textile processing units in four major cities of the country closed in protest against the imposition of a 17pc sales tax on five zero-rated sectors and the government’s failure to get the trade sector registered with the tax net. There are also fears the processing units’ owners will lay off hundreds of thousands of workers if the government continued ignoring their “genuine demands.” On a call by the All Pakistan Textile Processing Mills Association (APTMA), all textile processing units in Faisalabad, Karachi, Lahore and Gujranwala were closed. The APTMA chairman said the members of the industry wanted the government to take all of them on board while taking important decisions. “We support the government. But it is heading towards creating anarchy in the industry. Why it is doing this is really astonishing,” he wondered.
The All Pakistan Textile Sizing Association also shut 100 mills in Faisalabad, Jhang, Toba Tek Singh and Hafizabad. The association said they faced the similar issues and decided to join hands with the textile association. It says since the trade is still unregistered, the government must first bring the entire chain into the tax net. The trade sector is not ready to buy from them on the condition of computerized national identity card (CNIC) provision. The government has imposed 17pc sales tax on five zero-rated sectors by withdrawing the SRO 1125 and according to the association, the fluctuating rate of the US dollar is badly hitting the industrial sector, as it is importing textile chemicals and parts. The government has also linked the prices of gas and electricity to the dollar, which has added to their problems.
There is a general impression among industrialists that the government is going to kill the industrial sector and convert Pakistan into a trading country. The industrial sector finds itself in trouble in the current circumstances. The sizing sector will ultimately die if the power looms sector closes down. The situation will ultimately leave thousands of workers jobless, leading to a rise in street crime and unrest in the country.
On the other hand, the Looms Owner Association said that they had suggested the government fix the sales tax for every sector but it had made its decision without taking the power looms sector into confidence. The association said they were paying sales tax on the purchase of yarn, but the buyers were not registered with the Federal Board of Revenue (FBR). They have received notices along with electricity bills to get registered with the income tax department. It said the small power looms sector and sizing industry must be declared free from the audit for five years and the previous limit of Rs50 million for turnover should be restored.
The Karachi Traders Action Committee also announced a three-day protest against high taxes. The business community across the country held a joint session in which it decided to hold a strike. The traders also presented an 11-point charter of demand to the federal government, which included the threshold for tax to return to Rs1.2 million, reducing taxes on import of cars, uniformity in tax collection and no audit of taxpayers.
The All Pakistan Cement Dealers Association is also protesting against high taxes and FBR restrictions of documentation of sales, which affected the supply in parts of the country. Construction activities will suffer if the strike continues. The prevailing situation will lead to huge losses of revenue to the government. According to estimates, the government is losing revenues of Rs350 to Rs400 million daily due to the cement crisis. The strike gravely cut down the cement supply, resulting in the worst situation for the sector as total daily dispatches slashed from 150,000 tonnes to 40,000 tonnes. The industry has already been hit by issues like gas price hike, axle load limitations, smuggling of Iranian cement and increase in the federal excise duty. The cement industry contributed Rs110b to the national exchequer in the last fiscal year but it would considerably decrease due to the prevailing conditions. The All Pakistan Mobile Phone Association is also resisting hefty taxes on unregistered mobile phones.
The government has announced a massive 400pc increase in income and withholding tax which will be collected at the time of new vehicle registration, transfer of vehicle ownership, and with token tax. Car dealers fear their businesses will shut down after heavy taxes on the import of used cars and new vehicles being assembled in the country.
Major markets of all big cities are resisting the high taxes. They plan to continue their protest, if the government fails to slash the taxes. If traders shut down their businesses and take to the street for few consecutive days, it will create unrest in the country. If the government accepts their demands, it will find it difficult to run the affairs of the country. It is a really bad situation for the government.