ISLAMABAD: The government on Tuesday hinted at withdrawing an amendment in the income tax law after the opposition criticised it as a ‘move to give a backdoor escape to the prime minister’s daughter, Maryam Nawaz, in the Panamagate scandal.
Contrary to the opposition’s point of view which has called proposed Clause 23 of the Finance Bill 2016 ‘Maryam law’, the Federal Board of Revenue (FBR) and independent tax and legal experts say the clause would ‘rope in’ all who have undeclared offshore assets.
“The government has introduced this clause to allow people to own foreign trusts without declaring them,” said Senator Saleem Mandviwalla, who had served as finance minister in the previous PPP government. He alleged that it was ‘Maryam law’ that would exonerate her in the Panamagate scandal. In April, the Panama Papers revealed that three scions of the Sharif family were among hundreds of world politicians who have secreted their money in a tax haven.
The issue of Clause 23 also echoed during a meeting of the parliamentary committee set up to draft Terms of References (TORs) for an investigation into the Panamagate scandal. The amendment has been proposed to meet a requirement of the Organisation of Economic Cooperation and Development (OECD) for getting global body’s membership, said FBR Chairman Mohammad Nisar. The amendment, if passed by the National Assembly, would bring foreign trusts under the scope of the Income Tax Ordinance of 2001, he added.
The purpose of the amendment is to facilitate Pakistan’s request for an OECD membership, and if the government could not convince the opposition it may withdraw the amendment, said Law Minister Zahid Hamid after the meeting of the ToRs committee.
“We are concerned that the government is trying to give a backdoor escape to some offshore company holders through Clause 23,” said PTI’s senior leader Shah Mehmood Qureshi. He added that Finance Minister Ishaq Dar has assured to withdraw this amendment.
Legal experts say Clause 23 ropes in all foreign trust holders and this is not limited to only the ruling party. They say senior leaders of the PTI and PPP may also face the music. However, legal experts say the FBR might exploit Clause 23 when the government will announce offshore amnesty package in the next couple of months.
They say that after including foreign trusts in the ambit of income tax, the amnesty can also be offered to them.
In an official handout, the FBR explained that the proposed amendment is aimed at only defining various entities as individuals, association of persons or companies. Trusts have also been included in the definition of companies in the same section, which states that company also means a trust, an entity or a body of persons established or constituted by or under any law for the time being in force.
Threat to federation
While addressing a news conference, Mandviwalla and former finance minister Naveed Qamar alleged that the PML-N’s fourth budget would weaken the federation.
They said the federal government has tried to encroach on the provinces’ constitutional right of levying taxes on immovable property. “The PPP condemns the imposition of taxes on immovable property, likely builders and withholding tax on minerals,” said Mandviwalla.
He said the government’s decision to disallow input tax adjustment on provincial services tax was yet another step towards undermining the Constitution and the federalism.
Qamar said the government has also tried to encroach on the Senate’s constitutional right by proposing an amendment in the Fiscal Responsibility and Debt Limitation Act of 2005 through the Finance Bill 2016. The Supreme Court has already clearly defined a money bill (Finance Bill).
Mandviwalla said the federal budget 2016-17 was ‘direction-less’ and bereft of an economic vision. Qamar said the federal government did not take the provinces into confidence before announcing that the federating units would bear 50% subsidy cost of fertiliser. The Sindh government would not participate in this scheme, he said.
Mandviwalla said the government has been manipulating figures each year since the PML-N came to power in 2013. The finance minister is telling a lie to the nation by manipulating GDP growth, fiscal deficit, tax to GDP ratio, investment to GDP, inflation rate, unemployment rates, he added. “The finance ministry is dictating and pressurising the Pakistan Bureau of Statistics to get its desired economic results.”
Published in The Express Tribune, June 8th, 2016.