ZAHID HUSSAIN
The situation facing retailers due to the covid- 19 is sharp and ex istentialist in its affect.The lockdown damage is cutting intothese entities in a manner that may seriously compromise sustainability and their viability as going concerns. Retail is the last and final transaction point for entire supply chains of many categories of goods. Covid-19 is devastating in its impact as it scares people from carrying out even routine transactions through conventional physical proximity. This means not just retail but the entire supply chain, from primary to quaternary, stands to get severely reduced. In this situation the GOP and provinces may be worried about their own cash inflow in the form of taxes, duties etc., but have an active policy towards there own peoples businesses. They should not loose sight of thefundamental concepts of disposal income of people and price elasticity of a product. Every tax, whether direct or indirect, whether on income or sales, impacts either the disposal income or demand for a product. The disposal income in Pakistan is very low and nearly 75 % of electricity connections are with people using 300 units or less.Presumably electricity should have a very low price elasticity and yetthe populace reacts with using it less whenever the GOP increases its rates. Other consumer products like footwear and apparel etc., are even more price elastic. Added to this is the fact that with thousands of retailers operating, there really is no possibility ofconsumers being charged higher or more than they want to pay. The intensity of competition is in fact so severe that the retailers are regularly undercutting each other through discounts and everyday low prices. The government at this time should have a clear strategy to support and shore up these supply chains all the way till the POS ( point of sale) by understanding that disposable incomes have reduced and to keep transactions in flow the price of the product will have to be reduced by 25% or more. The government at all levels and its departments must share in price reduction by reducing their share in retail price by 15%, being the bigger and stronger organization. However, this will not nearly be enough and the governments at all level will also need to share and provide relief in input costs as well. The minimum required to sail though this vilent storm is from 15th March is: By GOP: Reduce the sales tax to 2 % Reduce income tax to 9 % Reduce withholding tax on rent to a max of 5 % Reduce the taxes on salary by 50 % By all Provincial Governments: Reduce Sales tax on services to 2 % Reduce withholding income tax on brokerage and commission of advertising agents and others from 10% and 12% to 2% and 2% respectively Social security contribution be cut to 3 % EOBI contribution be cut to 2 % PHA to reduce shop signage rent by 50% from last year Local Governments, TMA’s and cantonment boards to reduce shop signage tax by 50 % last year.—The Author is Chairman Rafum Group
