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New accord between traders and govt

The accord is the first positive development in the prolonged and agonizing government-traders tussle

Sep 04 - 10, 2000

It is heartening to learn that the long- drawn negotiations between the government and various trade groups from different parts of the country over the contentious issues like the general sales tax, turnover tax and the fate of undeclared stocks have finally ended in an accord acceptable to all the parties. This has also resulted in traders agreeing to fully cooperate with tax survey authorities as a part of government effort to document the economy.

The accord was announced by the finance minister, Mr. Shaukat Aziz at a press conference in Islamabad last week after a 3-day prolonged meeting with traders from over the country. He claimed that with this accord all the problems of the trading community have been resolved.

The traders assured the government that now they will cooperate in the documentation of economy process, pay tax in accordance with the agreed formula and maintain record keeping on their sales and purchases. He added that the traders will now fill monthly tax returns as 'enrolled' (not registered) persons, and will be bound to declare volume and value of their stocks by the end of each quarter (four times a year). "In view of their specific status of non-registered persons, they will now pay 1% turnover tax, but will be charged one and half per cent additional sales tax on their purchase" as a penalty stipulated under the law for non-registered persons.

"We will step up our campaign to register all businesses under the GST regime after arriving at an agreement with the trade sector to bring them under a specific mode of documentation of economy. Survey is now being extended to 13 more cities", said the minister.

The retailers will now get their undeclared stocks documented under the agreement by paying 2% of the actual volume of stocks-in-trade. A new facility allowed to them is that a variation of 15% will be applied in determining the taxable stocks (at 2%) , each year. The gross profit rate for determining the income tax amount in each case of trade and business will not be applicable in future. The formula of Net Profit Rate will be adopted for this purpose at the rate of 3.5%.

Retailers' stocks will be multiplied three times for calculation of their Net Profit Rate, while the wholesalers' stocks will, initially, be multiplied 6 times, until a new package is announced for them. Wholesalers jewellers have been promised a separate package of taxation with simplified documentation and "attractive rate" under the agreement; which would be announced shortly.


The agreement envisages that the trade bodies' nominees would be accompanying each of the survey teams, during their visits for distribution and retrieval of the survey forms, at each of the markets in 13 major cities and, after extension, in 26 towns of the country.

A partial immunity from audit operative under self-assessment scheme has been allowed to traders but their demand for increasing the exemption limit for assessment of turnover from Rs 1-3 million has not been accepted. Stocks put up for declaration under the formal will be subject to audit at the discretion of the tax authorities, wherever necessary.

The retailers' NPR at 3.5%, as proposed by the trade bodies, has been agreed, with the condition that the NPR rate for the wholesalers would depend on categories of traders, and that details on this count would be finalized through further negotiations.


The accord is the first positive development in the prolonged and agonizing government-traders tussle on the issue of the nationals' economy documentation. The compromising approach of both the government and the traders, which has helped in striking the deal, deserves all the support and approbation, as it has led to the much needed breakthrough in the documentation process. We certainly welcome the government-traders accord with the hope that the pie will not spoiled by the vested interests out of their selfish motives. Interestingly, small trader's leader Omer Saliva's departure for treatment abroad, seems to have paved the way for the accord, as he had repeatedly aborted the agreement on frivolous issues over the past few years. Let it be appreciated by all and sundry that documentation of the economy is a national imperative and everyone, especially in the business and trade community, is under national obligation to contribute its share in this context to help revive the shattered national economy. It is a historic fact that our economy has undergone unprecedented exploitation and muzzle over the decades, primarily because there has never been any serious effort to document in the past, corruption, tax evasion, kickbacks etc, were the natural off shoots of the lack of economy's documentation, which has made the country to endure the traumatic experiences of the economic degradation in the recent past. It's however, time to look forward and strive to make up for the losses, which the nation has suffered as a consequence of non- documentation of the economy.

The government deserves a pat on the back for reaching an accord, which had looked almost impossible till the last moment as the small shopkeepers with an annual turnover of about Rs one million were absolutely opposed to the idea of being brought into the GST net because of genuine logistic reasons. For this credit goes to the adroitness of handling and skilful use of prodding and persuasion. While providing the needed relief to the small shopkeepers, the agreement does not alter or dilute the design of the documentation of the scheme. The small shopkeepers will not have to go through the hassle of keeping and maintaining the books for claiming the refund of the sales tax they have paid on their purchases.

But the chain in the documentation has been saved from being broken completely by requiring these shopkeepers to obtain sales tax receipts when purchasing the requirements from registered outlets. This way their purchases will come on records, which will mean documentation to the extent of 99.9 per cent. For start this is as good as 100 percent it is at the point of sales to the retailers that most of the production disappears from the chain. Indeed at least 50 per cent of the textile output in the domestic market vanishes from the books at this stage. It is the same for most of the consumers goods produced in Pakistan.


By offering simultaneously a one-month amnesty for declared stocks which would also, hopefully, cover smuggled goods at the cost of two per cent in tax, the government is perhaps trying to plug completely the one last but very large avenue through which a sizeable part of the white economy turns black at a rapid rate. One only hopes that after the amnesty period the retailers would keep only the declared goods for which they can produce purchase receipts, which can be verified with the outlets issuing them. One hopes that after the end of one-year period of experimentation, the retailers would come to see the benefit of being within the GST net on their own.