Senate refuses to grant finance minister cabinet powers

Also rejects proposal to extend income tax exemptions for one more year

ISLAMABAD: The upper house of parliament on Thursday stood for supremacy of the Constitution and rejected all budget proposals of the federal government that undermine the law including giving federal cabinet’s powers to Finance Minister and extending income tax exemptions for one more year.

The Senate has adopted a report of its Standing Committee on Finance and Revenue on the Budget 2017-18. The Senate also rejected the budget proposal to validate all tax related Statutory Regulatory Orders that have been issued after the 18th amendment in the Constitution but became disputed after last year’s Supreme Court judgment.



Headed by Senator Saleem Mandviwalla, the standing committee has prepared the report for the Senate after holding threadbare discussions on every tax proposal. The Senate sent the report to the National Assembly for voting. In fiscal matters, the Senate’s recommendations are not binding on the government but these do put into question the government’s moral authority to take decision on matters where Senate is in disagreement.

The Senate has rejected the budget proposal to delegate cabinet’s powers to the finance minister in tax matters. The government has proposed in the budget that the federal cabinet’s powers may be delegated to minister in-charge finance and revenue in matters of changing the scope and exempting the tax levies. The FBR would exercise these powers with prior approval of the Finance and Revenue Minister.

The proposed amendment could raise constitutional issues, said Senator Mandviwalla.

In August last year, the Supreme Court had ruled that the prime minister could not take decisions by himself or by supplanting or ignoring the Cabinet because the power to take decisions was vested with the federal government, i.e. the cabinet, under the Constitution.

The majority of tax orders have become disputed as a result of the Supreme Court judgment where it defined the federal government as the collective entity which is described as the cabinet constituting the prime minister and federal ministers.



The government cannot function smoothly and we have to bring amendments in the Constitution to address this issue, said Finance Minister Ishaq Dar while speaking at the forum of the Senate.

The Senate also opposed the government’s proposal to extend income tax concessions approved by the Economic Coordination Committee of the Cabinet for yet another year till end June 2018.

Under the IMF programme, the government had withdrawn the powers to give tax exemptions by issuing SROs. However, it partially withdrew these reforms in 2015 when the government got amended the law, by giving these powers to the ECC of the Cabinet. Still, there was a condition in the law that says that ECC-granted tax exemptions would lapse automatically at the expiry of fiscal year.

Now, the government wants that even this one-year condition should be done away with, as it has proposed general extension in all tax exemptions instead of considering them on case to case basis.



The Senate has also recommended abolishing the Super Tax instead of extending it to the third year. Finance Minister had promised that the Super Tax would be levied only for fiscal year 2015-16. The Senate recommended 20 per cent increase in salaries of federal government employees –double than what Finance Minister announced in his budget speech.

The Senate has proposed that the FBR would not attach bank accounts in disputed tax case on payment of 10 per cent of the disputed amount. This is lower than 25 per cent proposed rate by the government.

The Senate has also rejected the government’s proposal to withdraw the right of a taxpayer to amend the Wealth Statement after filing it.

The upper house of parliament also opposed a budget proposal to give awards to FBR officers. It also rejected a proposal to share taxpayers’ information with Employees Old Age Benefit Institution. The Senate recommended to the National Assembly that the rate on workers profit sharing be increased from 5 per cent to 6 per cent under the Standing Order, 1968.

The Senate has also proposed to bring commercial and residential buildings under the scope of property valuation tax regime.

The Senate has also proposed to restrict the advertisement expenses of the pharmaceutical companies while rejecting the government’s proposal to relax the expenses to 10per cent of their sales. The Member FBR Inland Revenue Policy Dr Mohammad Iqbal had disclosed that the pharmaceutical companies were sponsoring honeymoon trips of doctors to promote their drugs.