New Delhi: Pakistan is witnessing a massive traders versus government showdown over the country’s new taxation policy. After nationwide strikes by the business community, the economy is now facing collateral damages.
Traders across Pakistan held a nationwide ban Wednesday against increasing electricity bills and taxes, which led to a daily trade loss of Rs 500 billion, Dawn reported.
Across major cities like Karachi, Lahore, Khyber Pakhtunkhwa and Balochistan, traders staged a full-day shutter-down strike to protest the government’s controversial tax reforms, including the newly introduced Tajir Dost Scheme.
The scheme aims to formalise the tax structure but has faced backlash from traders concerned about heavy taxes and high electricity bills.
Call to revise IPP contracts
The controversial tax reforms now challenge the ruling Pakistan Muslim League-Nawaz (PML-N) and Pakistan People’s Party (PPP), as the protesting traders have political ties with opposition parties, including Jamiat Ulema-i-Islam-Fazl JUI(F) and Jamaat-e-Islami (JI), the Dawn report states.
JI also criticised the government’s heavy taxes and electricity bills as a burden on the poor, accusing the government of failing to honour its promises and claiming the taxes are “part of a foreign conspiracy”.
In Punjab, the strike saw widespread closures in Lahore, Multan, Faisalabad, and other cities, including high-end markets and local food stalls. Traders in Islamabad also participated, marking a rare show of unity among various business sectors.
Earlier this month, even experts had expressed little optimism for a decrease in electricity prices. At a policy event, economic experts like Aamir Siddiqui and Muhammad Sabir had noted that the Pakistan government treats electricity and petroleum products as major revenue sources, while independent power producers (IPPs) operate with minimal oversight. These producers enjoyed a “‘freehand without any check and balance’ over their performance, outputs, and agreements signed with the government,” Dawn reported.
Pakistani industrialist bodies now want the government to revise its contracts with the IPPs without closing the units.
Despite protests, the Federal Board of Revenue (FBR) has refused to take back the Tajir Dost Scheme and will instead look at setting up a market-level review mechanism to “ensure that no shopkeepers face unfair tax rates”.
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Tajir Dost Scheme
The Tajir Dost Scheme is a voluntary tax compliance initiative launched by the Pakistan government in March. It was aimed at integrating unregistered businesses into the formal tax system. The scheme, mandated by the International Monetary Fund (IMF), is expected to generate Rs 400 billion to Rs 500 billion annually.
It offers benefits like reduced tax rates and simplified procedures for businesses declaring their assets and income. Tax rates for shopkeepers will range from Rs 100 to Rs 60,000 per month, based on store value and sales.
Traders opposed the scheme and had earlier resisted registration. Led by groups like Markazi Tanzeem-i-Tajran Pakistan and All Pakistan Anjuman-i-Tajran, they criticised the tax challans of Rs 60,000 issued to small businesses—which contradicted the promised tax limit of Rs 1,200 under the scheme—and hence launched the strike.
(Edited by Prasanna Bachchhav)