[stop-imf] IMF urges new taxes, Pakistani traders say no

[Robert Weissman]

IMF urges new taxes, Pakistani traders say no
By ANWAR IQBAL

ISLAMABAD, May 22 ( UPI) -- Pakistani traders who have threatened to go on
an indefinite strike from May 27, may also jeopardize a lifeblood loan
from the International Monetary Fund by rejecting new taxes and a
documentation of the entire national economy.

The traders paralyzed the entire country this week by observing a
three-day nationwide strike during which even corner grocery shops were
closed. They are protesting a new sales tax and the government's efforts
to document the country's huge illegal economy.

However, the IMF, which is considering a crucial loan package for
Pakistan, wants the government to ignore the traders and go ahead with the
much-needed reforms if it desires international assistance.

"This has placed the government in an unenviable position. If it accepts
the traders demand, it loses the loan. If it goes ahead with the reforms,
the traders go on an indefinite strike from this week," says Mustansar
Khan, who works for the official Planning Commission.

The IMF team is already in Islamabad to negotiate a $2.2 billion loan that
Pakistan will need when it has to start repayments on its $38 billion debt
after a grace period from a rescheduling exercise ends in December.

Officials of the country's new military government say that their decision
to impose a new 15 percent general sales tax and document the economy is
not linked to the IMF loan alone.

"The huge black economy is crippling the official economy. It has to be
documented. We must also expand our tax net," said Interior Minister
Moeenuddin Haider.

According to independent economic surveys, Pakistan's parallel economy
equals the $60 billion official economy. Less than one percent of the
country's 135 million people pay their taxes. Most of the tax burden is
shared by the salaried middle class as the rich and the powerful seldom
pay taxes.

Yet the traders are not even willing to consider the government's
decision. "We will go on an indefinite strike from May 27 if the survey
starts," says a statement issued by the All Pakistan Organization of Small
Traders and Cottage Industries, which spearheaded the weekend strike.
Describing the traders' protest as "without any justification," the
country's military ruler General Pervez Musharraf has vowed to go ahead
with his reforms because "they only burden the rich, not the poor."

None of the two sides appear in any mood to back down or compromise,
indicating a trial of strength from May 27 when the economic survey
starts. Tensions will further increase when the government enforces the
proposed general sales tax after the national budget expected early next
month.

"We would close markets one by one wherever the surveyors go and the
strike will be observed throughout the country," says an APOSTCI
spokesman.

The government's financial managers believe the GST and the tax survey
would for the first time bring many traders into the tax net and meet a
key IMF demand, which successive governments have balked at for years.

Former prime minister Nawaz Sharif, who was overthrown by Musharraf last
October, backed down when the traders flexed their muscles and instituted
a one-off payment instead, helping cause the suspension of a $1.56 billion
credit program from the IMF.