ISLAMABAD: Traders have started sharpening their knives for a showdown with the government over the withholding tax on bank transactions of over Rs50,000.

“We have authentic reports that the local Hundi system is emerging fast across the country as many traders have stopped using banking channels,” said Senator Salim Mandviwala. “The government should resolve the matter before it is too late.”

The traders organised a successful shutter-down strike on September 9 and are scheduled to meet after Eidul Azha to devise their next course of action. They are against the 0.03 per cent withholding tax on all banking transactions above Rs50,000 for non-filers of income tax returns. This tax is set to become 0.06 per cent from September 30.

Ajmal Baloch, the president of All Pakistan Anjuman-i-Tajiran, warned the government that the next step by the traders would be serious.

“We have shown how to convey the message peacefully to the government but I think (Finance Minister) Ishaq Dar thinks he is Ishaq Drone and can shoot us from the PM House.” He said when the doctors took to the streets they were given their rights; same was the case with farmers. “So it is time for traders to be in the streets too.” The expected next round of agitation will commence after Eidul Azha and it is likely that the third strike call would be given on October 7.

On the other hand, it seems that the authorities, possibly the finance ministry, are trying to involve the chambers of commerce for some way out from the visible deadlock.

Muzamil Sabri, the president of Islamabad Chamber of Commerce and Industry (ICCI), who is also a member of the advisory committee of the FBR, said a large number of traders, especially the wholesalers, did not want to get into the tax net and this is the main issue. He said the matter was more serious than it appeared.

“It has now become a political challenge for traders supporting the ruling PML-N. We have reports that even the PML-N MNAs in some industrialised cities of Punjab were supporting the traders to become more aggressive.” He said the traders had also resisted the sales tax registration during the Musharraf era but it was handled effectively by the military ruler and Shaukat Aziz.

“Similarly, the issue was well managed by former president Asif Ali Zardari but now the PML-N group, including Ajmal Baloch, is under pressure from the traders to prove their loyalty to the community,” Mr Sabri said.

At the same time, he expressed confidence that the matter would be resolved amicably soon after the Eid.

“We will sit together somewhere in Rawalpindi and Islamabad to talk a way out informally,” he added. “There is a need to change the tax culture and we should sit and talk about it.”

Similarly, Asad Mashahadi, the president of Rawalpindi Chamber of Commerce and Industry (RCCI), said the main issue related to the wholesalers and some retailers, including a few cash and carry departmental stores, because they did not want to come under the tax net.

“Wholesalers deal in millions but their profit is in thousands only due to heavy fluctuations and competition but the tax authorities do not understand this reality,” he said. “On the other hand, we know some cash and carry stores who made daily sales of up to Rs9 million in last days of Ramazan but paid no taxes.”

Mr Mashahadi said there had to be a serious consideration to understand why people did not want to become filers or even get registered with the tax authorities. “Because they are too corrupt to deal with.” He, however, acknowledged that the traders cannot be forced into getting registered through the 0.06 per cent withholding tax only.

“We need to talk to them and the RCCI will be doing it after Eid. But still there is a need to control mismanagement in the FBR to pacify the traders otherwise they have already started operating their businesses without the banks.”

Published in Dawn, September 20th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play