Senate opposes FBR overhaul before elections

Summons interim ministers of law, finance to justify new legislation

ISLAMABAD:

An arm of the Senate expressed its opposition on Wednesday to the interim government’s decision to overhaul the Federal Board of Revenue (FBR) and summoned the interim ministers of law and finance to justify their manoeuvres in introducing new legislation.

The Senate Standing Committee on Finance made this decision after the Chairman of the Federal Board of Revenue, Malik Amjad Zubair Tiwana, confirmed that the proposed restructuring of the organisation would necessitate wholesale legal changes, breaking it into six to seven pieces.

“The initial working showed that around 1,000 amendments would be required in the laws and rules to implement the restructuring approved by the Special Investment Facilitation Council (SIFC),” said the FBR chairman. He explained that three types of amendments would be necessary, including amendments to existing laws, Money Acts, amendments to rules, and fresh enactments.

As a result, the FBR would be fragmented into six or seven entities, including the Federal Board of Customs, Federal Board of Inland Revenue, Tax Policy Division, Tax Policy Office, and directorate generals of evaluations, according to Tiwana.

The SIFC has given one month’s time to implement the new restructuring.

The committee, headed by Senator Saleem Mandviwalla, decided to summon both Law Minister Ahmad Irfan Aslam and Finance Minister Dr Shamshad Akhtar to justify the interim government’s inclination to introduce restructuring and new laws without constitutional mandate.

The Express Tribune had reported on Wednesday that differences between the FBR chairman and interim finance minister had persisted over restructuring of the tax machinery. Both the finance minister and the FBR chairman have not been able to resolve their differences regarding submitting a summary for the cabinet.

On January 3, the SIFC, in principle, approved the FBR’s administrative and legal restructuring and instructed the finance minister to take a summary to the federal cabinet within 15 days for approval.

So far, the FBR has performed well this fiscal year, however, the Senate Standing Committee’s opposition raises concerns about potential disruptions to revenue collection, especially when Inland Revenue Service officers have threatened a nationwide strike. Differences between the Customs Service Group and the Inland Revenue Service further complicate the situation.

If the proposed restructuring is implemented, the FBR would become a public-private partnership company, said Senator Farooq H Naeek, former Law Minister and committee member from the PPP. He stated that it was a drastic revolutionary setup, and the interim government should refrain from it.

The PPP’s Senator Sadia Abbasi also opposed the FBR restructuring, urging the caretaker government to refrain from any such act that did not fall within its mandate.

Read SIFC deadline to overhaul FBR set to miss

The Senate Standing Committee on Finance’s opposition weakens the case of the interim government, particularly when only 21 days are left in the general elections.

The standing committee also deferred two bills proposed by the interim government regarding changes to banking laws on the grounds that it was not within the mandate of the caretakers to legislate on any matter.

Flawed SOE Act

The standing committee’s proceedings also revealed flaws in the Ministry of Finance's preparation of the State-Owned Enterprises (SOEs) Act 2023 – an action that the ministry had widely propagated as one of its success stories.

The committee unanimously approved amendments to the SOE Act, proposed by Senator Bahramand Khan Tangi of the PPP, to further strengthen the law. The committee approved amendments to minimise conflicts of interest, prevent misuse of public resources, and improve the criteria for selecting chief executive officers of the SOEs.

Surprisingly, Secretary Finance Imdad Ullah Bosal opposed the amendment to set the minimum experience for the appointment of the chief executive officer. Under the existing law, any graduate with zero experience can be appointed as the chief executive officer of a government-owned company. The current law favours bureaucrats to become chief executive officers of these companies with little or no relevant experience.

The committee approved an amendment to set a minimum 10 years’ experience condition for the appointment of the chief executive.

The finance ministry’s track record of appointing the right bureaucrats for the right SOEs is very poor. It appointed the additional secretary external finance as a member of the SNGPL board. Despite being transferred to the Establishment Division as special secretary, the officer still sits on the SNGPL board.

Similarly, some additional and joint secretaries of the ministry are occupying board positions with little or no sector experience. The people dealing with budget matters have been appointed to the boards of power generation companies.

The secretary finance also admitted that the rules under the SOE Act 2023 have not yet been framed.
“How can a law become operational without the approval of the rules?” questioned Senator Farooq Hamid Naek.

The committee also approved an amendment that SOEs’ resources cannot be used for personal monetary and political benefits. Again, secretary finance opposed the amendment.
Senator Tangi said that political parties were using the resources of power distribution companies to influence voters.

Published in The Express Tribune, January 18^th, 2024.

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