Dar-led body to review tax on banks

PM gives directive to recover Rs7m from NBP head for unauthorised overseas trip

ISLAMABAD:

Prime Minister Shehbaz Sharif has constituted a committee, headed by Deputy PM Ishaq Dar, to resolve the issue of 15% additional income tax on banks and has also censured the National Bank of Pakistan (NBP) head for defying his orders.

PM Sharif has given instructions to recover Rs7 million worth of expenses from the NBP president as the money was spent on an unauthorised overseas trip amid warning that "disciplinary action" would be taken against any such defiance in future.

Meanwhile, the PM constituted a committee to resolve the issue of 15% additional income tax on banks. The tax is being charged if the advances-to-deposit ratio (ADR) of banks falls below 50%.

Ishaq Dar had in June this year frustrated a move to quietly waive the tax in the Finance Act.

Members of the committee are the minister for finance, minister for law, minister of state for finance, attorney general of Pakistan, finance secretary, Federal Board of Revenue (FBR) chairman, State Bank of Pakistan (SBP) governor and Asma Hamid.

Terms of reference (ToRs) of the committee are to review the existing legal framework related to ADR of the banking sector and deliberate on alternative fiscal schemes to tax bank profits accrued from investment in government securities.

The committee will engage with the banking sector for developing consensus on the way forward. It will give firm recommendations for an optimum solution to ensure the realisation of government revenues by the end of December.

The committee will submit its report within one week. Dar has been given the mandate to suggest legal amendments and regulatory changes for legislation to resolve the issue.

A senior government official told The Express Tribune that PM Sharif showed displeasure over the unauthorised visit of NBP President Rehmat Ali Hasnie to France. The premier also ordered the recovery of expenses incurred on the visit, he added.

The NBP president went to France apparently to attend a business executive course but he bypassed the federal government and did not secure requisite approvals in breach of the PM's instructions and applicable policies.

A senior finance ministry official said that the government would recover Rs7 million from the bank president. After the PM took notice, the Ministry of Finance wrote to the NBP president and sought the recovery of the amount, showed official documents.

Ministry of Finance spokesperson Qumar Abbasi did not comment on the matter.

The finance ministry has written to the NBP president, saying that the president "not only travelled without approval of the prime minister rather also expended millions of rupees from the government exchequer without approval of the PM, which is a clear defiance of instructions of the government and willful insolence".

The Cabinet Division had issued instructions for seeking approval of the PM Office for any visit abroad by the senior government officers. The instructions were aimed at avoiding wasteful expenses and regulating the overseas trips of civil servants and heads of government organisations in the context of security and confidentiality.

The finance ministry stated that the PM had shown displeasure over the NBP president's acts of omission and commission. It warned the president to "remain careful in future" to avoid "strict disciplinary action".

There have been incidents where bureaucrats and the heads of government organisations try to bend rules to get certain benefits.

The bureaucrats often stay on many boards of companies, despite not being directly linked to the subject matter in some of the cases. They earn hefty fees from board meetings, over and above their salaries.

The Pakistan Democratic Movement (PDM) government had given 140% executive allowance to the federal government officers aimed at improving their pay structure. The purpose was to bring the salaries of the federal bureaucracy at par with the provincial governments.

However, this has not completely stopped the misuse of official resources. A retired FBR chairman is still using Pakistan Customs vehicles. Despite reminders, he is not ready to return the luxury cars.

In June this year, the PM capped the maximum board fee at Rs1 million per annum that a civil servant could get for attending board meetings of state-owned enterprises and other organisations.

However, these instructions have not been fully implemented. The finance secretary is one of the few officers who is surrendering funds in excess of Rs1 million.

The government's interests on the public sector companies are watched by these bureaucrats and the idea behind giving them lucrative benefits is to protect the public interest. However, there are also cases where one secretary is present on so many boards as an ex-officio member and most of the time the secretary's proxies attend the meetings.

But some officers are sitting on boards despite having no subject relevance. They often do not leave positions despite being posted out of the ministries. This is also in contradiction with the directives of the PM and the Finance Division.