HE government is facing a growing storm of protest from the traders lobby against the implementation of a new withholding tax on all types of bank transactions by non-filers of tax returns. Given that this is a matter of such vital importance, the state should stand its ground firmly and refuse to compromise further than the concessions already made. The traders lobby presents a ramshackle front and many of their arguments make little sense: they argue that they are protesting on behalf of the people, that the measure is an imposition at the behest of foreign powers, and that they will withdraw their money from the banks and conduct all future transactions in cash instead. Furthermore, the leadership of the traders is fractious and divided; three separate dates for a shutterdown strike were announced because the various factions could not fall in line behind a common leadership. The opposition to the government`s move is unlikely to be able to sustain itself for very long.

The State Bank confirms that there is no appreciable decline in deposits in the month of July. Even if there is a small decline, it will be hard to attribute it to the withholding tax since the early weeks of July routinely see a drop in deposits which had been inflated in the closing days of June as the bank`s financial year ends, as well as Eid withdrawals. Other than withdrawing their funds from the banking system something the traders cannot do for very long there is no other leverage that the protesting groups have over the government.

Their ranks are depleted now that Chambers of Commerce across the country cut a deal with the government early in July and withdrew their protest. Karachi traders are largely ignoring the strike calls.

Only a few bodies in Lahore are raising a furore, and even their leadership is internally divided. With a shallow base, a narrow front and practically no leverage, the protesting parties should be easy to handle. The tax has exposed the true face of Pakistan`s informal sector, and the practice of benami accounts to conduct business transactions. Given the large costs that the lack of documentation imposes on those who are within the system, the government should stand firm on its resolve. If the tax forces a large number of fresh filings of tax returns, the government can claim success in a very important battle.