Having Failed Before, Will Pakistan Be Able to Tax its Retail Sector This Time?


The biggest crisis facing Pakistan right now is the economic crisis and one of the long-standing demands by the International Monetary Fund and other International Financial Institutions has been for Pakistan to improve its tax-to-GDP ratio.

The new government appears to be trying what many have before – get the trade sector into the tax net. But will it succeed where others have failed? As an Editorial in Dawn asked: “That really is the only question worth asking at the moment. With the country already massively indebted and sources of funding beginning to run dry, it is clear that it cannot continue to borrow blindly to finance its expenditures. Those already in the tax net, especially the salaried class, have mostly been squeezed dry, and there is growing pressure on the government to now go after those who have traditionally not contributed their fair share to the kitty. The imbalance is staggering — some would say criminal.”

Earlier governments have been reluctant to tax traders and shopkeepers. “The government has few options other than to finally start making the tax system more equitable for all. It has been reported that the SIFC will be monitoring the progress of the announced compulsory registration scheme for traders. Let us see whether its oversight is enough to cow the trade sector into getting in line.”

As the Dawn editorial warned: “It is unlikely to be an easy transition. The economy is tight for everyone, including traders. Even in better times, they managed to cause considerable trouble every time such measures were implemented and invariably managed to have them overturned. The resistance will be tougher now, given how difficult the conditions are. However, the government must persist. The already taxed are at a breaking point. The unfair burden placed on them is a major reason why the deterioration of Pakistan’s economic conditions has been so rapid. More sources of revenue need to be unlocked, or the dystopia in the economic order will continue to wreak havoc.”


Author: Maria Malik