What the government must do
Traders’ threat to besiege FBR to protest the withholding tax puts the government in a precarious position. It can no longer afford to cajole these lobbies by granting them concessions, like extending the deadline for 0.3 percent WHT in place of 0.6 percent. It is just such compromises, along with undue patronage, that have long encouraged tax evasion. That makes the government responsible, of course, for continued low tax revenue and its subsequent effect on the larger economy. Already much of the ongoing fiscal has been wasted in trying to accommodate disgruntled trade groups.
Taxes are, of course, a sensitive subject for the ruling party. Back in the day the Sharif brothers made loud claims about expanding the tax net, along with finally ending the power crisis and winning the war on terror. Half way through its tenure, it has little to do with toggling the war, which is going well, but it has failed to honour the other two promises. And while it can wriggle around the power issue, it has little or no justification on the tax front. There are no infrastructural setbacks, just a lack of political will.
That is precisely why the finance minister must deal with threats of protests firmly. The government has already exhibited considerable flexibility on the issue. Trade bodies must be made to understand that taxes will have to be paid. But for the exercise to be fruitful it will have to be wholesome. The government must, finally, overcome its paralysis and raise conventional taxes as well. The matter is central to economic growth, especially since exports do not contribute much to the exchequer either. Hopefully the government will be able to drive in its point this time, and there will be no unnecessary sit-ins outside the FBR building.