There is the danger that all stakeholders in the current stand-off between petroleum pump dealers and the government, may end up not seeing the wood for the trees. The provincial governments must feel a certain triumph that pumps continued to operate normally, except in Karachi. However, it should not be assumed that the pump owners have either backed down or that the government has caved in. The government still demands that pumps pay 0.5 percent on turnover, as advance income tax. This the pump owners are resisting fiercely, not just because it would identify how much the particular pump was selling, but it would also lessen, perhaps eliminate, the ability of petrol pumps to engage in adulteration of their products, a process which needs a certain created confusion about the exact amount of petroleum products arriving at a petrol pump. It is unfortunate but true that petrol pumps engage in adulteration almost at will, to the extent that some pumps have built a clientele by maintaining a reputation for providing pure fuel, or at least keeping adulteration within limits.
The government finds itself roasted over two slow fires. First, the withdrawal of the turnover tax will require legislation, in the form of a repeal of the Income Tax Act amendment just passed in the Budget session which enabled this turnover tax. Second, in its attempt to widen the tax net, it must show resolve, which will hardly be the case if it lets the petrol dealers off. The pump owners may count themselves unlucky, but they should remember that the government sees them as a test case for the entire retail sector. It should also be remembered that this turnover tax does not merely involve income tax, but also sales tax.
The Petrol Pump Dealers Association suffers from a number of handicaps. First, there is not much sympathy for them because of adulteration. Then, their attempts to remain outside the tax net are viewed without sympathy by a population which is not only within that tax net, but which has gone through a bout of inflation and low growth. It should also be remembered that the government has made commitments to the IMF ‘on spec’, in the hope that they will be granted the package they have been desperately seeking. A strike is a test of nerves: the dealers have threatened to bring the country to a halt, but they will also have to forego earnings. However, in the confrontation, they have very few trumps.
