ISLAMABAD: Hundreds of flour mills across Pakistan remained shut on Thursday as their owners announced an indefinite strike against the government’s move to impose a new withholding tax, exacerbating fears of a food shortage in many parts of the country. 

The Pakistan Flour Mills Association (PFMA) says the government has imposed a 5.5 percent withholding tax on sales of flour mills in the national budget. Javed Yusuf, a former chairperson of the PFMA, said the government has also directed flour mills to collect another 2.5 percent withholding tax on the sale of essential commodities to retailers (non-filers) and 2 percent from wholesalers (non-filers). The association says it has been tasked to collect a 0.5 percent withholding tax on the sale of flour from retailers (filers) and a 0.10 percent tax from wholesalers (filers).

Pakistan’s president last month signed the tax-heavy controversial budget into law. The ambitious budget has a tax revenue target of 13 trillion rupees ($46.66 billion) for the current fiscal year, up about 40 percent from the previous one. Pakistan’s government took the unpopular measures amid negotiations with the International Monetary Fund (IMF) for a fresh loan program. The IMF has insisted the government undertake tax reforms to raise revenue and generate fiscal space. 

“We are observing a nationwide strike against the government for imposing taxes and making flour millers the tax collection agents,” Yusuf told Arab News. “Our strike will continue till the government accepts our demand of withdrawal of all taxes levied in the budget.”

He said 1600 flour mills across the country remained shut on Thursday, adding that they employed over 4,000 people directly. 

“We cannot collect taxes on behalf of the FBR, it’s not our job,” Yusuf said. 

Speaking to a private news channel on Wednesday, PFMA Chairman Asim Raza criticized the government for taxing an essential commodity such as flour. 

“If the government does not provide us this [tax] exemption like it did previously, then we won’t be able to run the industry,” Raza said. “Then it will be an addition of Rs200 [$0.72] to the price. The government will notify the prices and we will sell it at the inflated rate.”

The strike takes place as Pakistan navigates a tricky path to economic recovery amid staggering inflation and a macroeconomic crisis. The South Asian country has been scrambling to secure foreign investment and external funding from allies in a bid to keep its fragile $350 billion economy stable. 

Pakistan has been grappling with an acute balance of payments crisis, a weak currency and double-digit inflation that reached a record high of 38 percent in May 2023.