Tax bill likely to sail through Senate body

MQM, PML-N abstain; ANP, BNP-Awami support results in a tie, raising chances of the law winning initial approval.

ISLAMABAD: The Reformed General Sales Tax bill is set to smoothly sail through the Senate’s standing committee on finance, winning initial approval despite boycott by the Mutahidda Qaumi Movement (MQM) and Pakistan Muslim League-Nawaz (PML-N) on the first day of proceedings.

This is considered to be an important milestone before tabling the law, which is directly linked with restoring a $11.3 billion standby IMF arrangement, for approval in the National Assembly.

Notwithstanding political rhetoric, lawmakers of the Awami National Party (ANP) and the Awami faction of the Balochistan National Party (BNP-Awami) supported the bill on the first day of the committee’s proceedings. The Pakistan Peoples Party (PPP) has four members on the 12-member panel.

The support of these two senators resulted in a tie and any decision to boycott or abstain from the proceedings would help the government to get recommendatory approval.  After the 18th Amendment, the panel has 14 days to either approve or reject the bill.

PPP Senator Islamuddin Shaikh reminded that 12 days have already passed.

Senator Ahmed Ali of the MQM, who is also the chairman of the committee, and PML-N Senator Ishaq Dar did not attend the first session.

In Senator Ahmed Ali’s absence, PPP’s Senator Islamuddin Shaikh chaired the session.

The committee mainly focused on the overall objectives of the proposed legislation, its impact on the poor and its legal position.

Former Senator Anwar Bhindar, who is considered an authority on constitutional matters, termed the bill unconstitutional and illegal. He was invited by the committee as an expert.

“The constitutionality and legality of the bill should be reviewed before it is (granted) recommendatory approval,” said former Senator Bhindar.

He said under the Constitution, the federation cannot legislate on provincial subject unless the provincial assemblies authorise the centre via adoption of a resolution.

The proposed GST bill talks about provincial bills and not such a resolution which is unconstitutional, he added. Senators representing PML-N, Jamiat Ulema-i-Islam-Fazl (JUI-F) and Jamaat-i-Islami (JI) endorsed legal points raised by the senator.

When Finance Minister Hafeez Shaikh was asked to comment on Bhindar’s statement, he said that the senator could not object on behalf of provinces, they have enough say in the matter.

According to Bhindar, the committee should first decide whether the bill should be recommended or not and if it is to be recommended, it should be thoroughly scrutinised.

He was of the view that the consent of four provincial finance secretaries was not equivalent to a provincial assembly resolution.

“Penalties proposed in the bill can only be invoked after provincial assemblies allow the federation via separate resolutions.”

The government has proposed to slap a penalty and a jail term of up to three years for not paying due taxes or submitting the required data.

Bhindar pointed out that the proposed draft also covered some aspects which come under the domain of the Council of Common Interest, the highest inter-provincial decision-making body chaired by the prime minister.

Pakistan’s major failure is low tax as a percentage of the total size of national economy, said Finance Minister Shaikh.

“People whose businesses and families will be affected are opposing the GST bill.” He said these people are “very powerful”. Pakistan’s tax-to-GDP ratio is nine per cent which is among the lowest in the world.

JI Senator Khurshid likened the government’s haste to “getting approval at gunpoint”.

“Has the government exhausted the avenues of tax on agriculture income and getting due taxes from politicians that it has resorted to taxing those who are already over-burdened” questioned Senator Haroon of PML-Q.

Senator Ilyas Ahmed Bilour of ANP “conditionally” favoured the GST bill. He said his party has objections over certain clauses. Senator Kalsoom Parveen of BNP-Awami also announced her support.

“The existing GST system is not beneficial for any province by comparison with the proposed one which will promote healthy competition among the provinces,” said Hina Rabbani Khar, the State Minister for Finance and Revenue.

Special Secretary Finance Wajid Rana said that 198 new services are being proposed to be brought under the tax net. He said tax collected by the federal government would be distributed among the provinces in accordance with the proportion of collection.

He said provinces have differences over collection from five services and negotiations were still going on this matter. “Till the resolution of the issue, the revenue being collected on these services will go into an escrow account”, he added.

Published in The Express Tribune, November 23^rd, 2010.