Pakistani traders strike over steps to boost taxes as urged by IMF

Markets and many businesses closed across Pakistan on Tuesday for a strike to protest against government measures aimed at meeting IMF demands to boost tax revenues to bolster depleted public finances.

The International Monetary Fund approved a $6 billion loan package for Pakistan in July but warned that it would require ambitious fiscal measures and a sustained commitment to mobilize tax revenue to ensure funds for development while reducing debt.

The two-day strike is the second since July called by business groups after negotiations with government on efforts to enforce the paying of sales tax and catching tax dodgers.

“This taxation system ... will bring death,” Atiq Mir, president of the All Karachi Traders Alliance, which represents markets in Pakistan’s biggest city, told Reuters.

All major wholesale markets in the commercial hub were closed along with most shopping centers.

Traders holding banners and chanting slogans against the government held protests in cities across the country.

The government of Prime Minister Imran Khan has made getting the economy back on track its main priority.

The fiscal deficit has ballooned to about 7 percent of gross domestic product and a balance of payments crisis is looming.

Pakistan has long suffered from a weak tax base, with only about 1 percent of its 208 million population filing income tax returns and major industrial sectors dominated by powerful lobbies paying little or no tax.

The agricultural sector, for example, dominated by politically powerful landowners, makes up about 20% of the economy but accounts for only 0.22% of direct taxes, according to the World Bank.

The general secretary of the All Pakistan Association of Traders, based in the eastern city of Lahore, said the government risked enraging voters.

“This government has increased inflation, it has raised discount rates ... it has made the life of the common man miserable because of its economic policies,” Naeem Mir said.

Among new measures angering traders is a rule requiring anyone buying items worth 50,000 rupees ($315) or more to produce identity papers, a measure aimed at helping authorities track tax evaders.

Naeem Mir said traders had called for the amount to be raised to 100,000 rupees but the government has not responded.

“Why won’t they listen to us? We’ll protest, protest and protest,” he said.

“The future of the trading community and their children is at stake.”