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GST: Why not?

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  2. The new ATT agreement
  3. GST: Why not?
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From Shamim Ahmed Rizvi, Islamabad
May 29 - June 04, 2000

The writ of the state must be established

The issue of custom duty on the smuggled goods sold in the various Bara Markets — which previously confined to border areas in the N.W.F.P. Province but now have sprung up all over the country — remains unresolved despite the fact that extended deadline of April 30 passed about 3 weeks back. For unexplained reasons the government has not moved against bara markets as declared by Gen (Rtd) Moinuddin Haider, Interior Minister of Pakistan in a most forceful way.

While the Bara Market traders, despite repeated warnings and ultimatums by the government, refuse to pay custom duty and are up in arms against government's most legitimate decision, the business community has grouped its forces to refuse the payment of general sales tax and resist efforts of the government to meet the universal demand of documentation of economy and tax survey to identify tax evaders. By arranging a 3-day country wide strike the traders community has demonstrated its strength. In all his magnanimity the Chief Executive has agreed to meet the representatives of the traders and listen to their point of view. Some critics have described this gesture as a sign of weakness on the part of the government. The leaders of the trading community are giving the same impression to their members saying that their unity during 3-day strikes has forced the present government to bow before them. There is no harm in Chief Executive having a meeting with leaders of trading community but this opportunity should be used only to tell them frankly and firmly that there is no escape from GST or documentation of economy. They should also be told in plain words that no further strikes will be tolerated.

This is necessary as, in the meanwhile, the Central Chairman of All Pakistan Organisation of Small Traders and Cottage Industries (APOSTCI), Umer Sailya, has asked the government to stop its proposed shop-to-shop survey that is to precede the imposition of GST. Otherwise, he says, the business community will launch an agitation and go on an indefinite strike. The question many would like to ask Sailya and his associates is why the income of the trading community should not be evaluated and taxed like every body else's in the country? So far the excuse the traders have come up with is that a large number of them are uneducated and hence unable to maintain the necessary paper work. This is not a convincing enough excuse. If a person can run a business he/she surely would be handling a certain level of statistics on paper, which ability should be sufficient for the tax purposes also.

The simple reason behind the traders' resistance is an unwillingness to pay their dues at the rate which is commensurate with their earnings. That is why they suggest that they would be willing to pay the tax if it is renamed development tax and levied at a flat rate. This way they can claim to pay their dues yet hide their real incomes. A large number of business in the sector are also unregistered, which is another reason for the fear of the proposed survey. What may be an added cause for anxiety on this score is the inclusion of Army personnel in the survey teams that are to carry out a countrywide GST and income tax survey. For obvious reason, the traders do not like this. In fact, Sailya has urged the Chief Executive to stop the Army's involvement in the matter. But if there exists a general consensus of opinion in society on the question of Army's role in civilian affairs it is on handling such difficult issues as the one at hand.

The government has to collect the tax as per the principle of equity as also to determine the volume of the business activity so that the economy is duly documented. It is essential that all incomes be taxed at the same rate and manner irrespective of the source of such income. This is a vital requirement for generating the much-needed revenue as well as for future planning purposes in all sectors of the economy.

In the past, both the PPP and the PML governments had tried but failed to impose this important tax mainly because of their fear of losing electoral support among the powerful trading class. The present government need not be inhibited by any such consideration, there is no popularity contest to be won. Hence, it is hoped that it will not get cold feet at the last minute and backtrack from its resolve to conduct the proposed shop-to-shop survey and impose GST. The writ of the state must be established whether it is the issue of collecting customs duty from the Bara Market in Peshawar or the Sutter Mandi in Faisalabad.