Budget creation: Govt constitutes a large tax advisory committee

To give representation to lobbies in attempt to stem post-budget protests.

ISLAMABAD:

Just months before the announcement of the new budget, the federal government has decided to constitute a large Tax Advisory Committee (TAC), which will give representation to major competing lobbies in an attempt to neutralise forces that often create trouble in post-budget scenarios.

The Federal Board of Revenue (FBR) will provide the secretariat support to the 23-member advisory body with FBR Chairman Tariq Bajwa being its convener, said FBR officials. There was a proposal to give chairmanship of the advisory committee to an independent professional in a bid to ensure impartiality, but it was shot down due to opposition from the FBR, officials added.

Bajwa confirmed to The Express Tribune that the TAC has been constituted with a mandate to give tax advice and formulate budget proposals for financial year 2014-15, commencing from July this year. He said a notification in this regard will be made public soon.

The committee will be made up of business leaders, former bureaucrats, chartered accountants and tax professionals. These represent lobbies that generally express their resentment after the budget is announced.

However, the wide range representation has enlarged the committee’s size, reducing the prospects of any meaningful discussions due to competing interests, according to officials.

The federal government has already constituted a large Economic Advisory Council (EAC), giving representation to almost all economists who are critics of the government policies. It excluded Dr Hafiz Pasha and Dr Mohammad Yaqub from the EAC, two vocal critics of the PML-N’s economic policies. Lately, Dr Pasha has been successfully neutralised by the PML-N’s Punjab leadership, according to sources.

The EAC members have complained that no meaningful discussion has been held during first two meetings.

But Bajwa is of the view that the government had to ensure equal representation in the TAC. If the Karachi Chamber of Commerce and Industry president can be a member of the TAC then why not his Quetta counterpart, he maintained.

The PML-N government had to face a barrage of criticism from all quarters after it presented its first budget in June last year. The business community kept pressurising the government even months after the passage of the budget and eventually won tax concessions.

While addressing the launching ceremony of tax amnesty scheme in the Prime Minister Office held late last year, Finance Minister Ishaq Dar had admitted that the PML-N government had accepted all 26 demands of the business community.

Learning from the experience, the government has given membership to all the five main chambers and to the Federation of Pakistan Chambers of Commerce and Industries, while also bringing into the fold other influential industrialists, sources said.

The tax proposals submitted by the business community will be securitised by the TAC, which will allow the government face-saving in a post budget scenario, they added.

The idea to constitute a tax advisory committee had originally been floated to simplify tax laws, plug loopholes and ensure principles of equity and fairness in the tax systems by seeking help of leading tax professionals of the country.

The tax machinery is heavily reliant on presumptive tax regimes, as the FBR’s efforts have so far proven insufficient to tap the real income tax base. Similarly, the sales tax regime has also been plagued by granting tax exemptions to affluent people.

However, there will be little leverage given to the TEC, as the new budget will be finalised between Pakistan and the International Monetary Fund during the next round of talks, scheduled to begin from April 30.

Next year’s budget will be formulated keeping in mind a budget deficit target – the gap between national income and expenses− of 4.9% of Gross Domestic Product.

Published in The Express Tribune, March 9^th, 2015.

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