Clear concessions: PAC looks to right abuse of tax breaks
FBR head says powers should be given back to parliament.
ISLAMABAD:
The Public Accounts Committee (PAC) has admitted that parliament had “itself abdicated its powers to give tax concessions” which were then “massively abused” by government departments.
The country’s top accountability body stated that government departments, including the Federal Board of Revenue (FBR), misused the powers of parliament and made it a tool for striking underhanded deals by giving tax relief to various industries mounting to Rs659 billion over the years.
In a bid to foil such cases taking place in the FBR, the PAC has recommended parliament to amend the constitution and all relevant laws to take back these powers, which, they said, the FBR was abusing through issuance of Statutory Regulatory Orders (SROs).
Consequently, Parliament’s accountability body has constituted a seven-member inter-ministerial committee which will recommend how to proceed on this matter within a fortnight.
The committee will be headed by Planning Commission Deputy Chairman Dr Nadeemul Haque, who explained at length how the revenue board was abusing these powers. There was also a proposal to table a draft of SROs in relevant standing committees of Parliament during the PAC meeting.
This is one of the few instances where the FBR admitted guilt and its chairman, Ali Arshad Hakeem, said the “country’s tariff structure has been made in a way that allows arbitrage and rent seeking.”
“Levying or exempting tax is the responsibility of parliament, which has been taken over by the government departments through SROs, which is unlawful,” said PAC Chairman Nadeem Afzal Chan. He revealed that there was a clash between the Finance Bill, approved by Parliament, and the SROs, issued by the FBR.
Planning Commission Deputy Chairman Haque then briefed the PAC that the main objective of all IMF programmes was tax reforms, which could not be achieved as loopholes were created by arbitrarily issuing SROs by the FBR and the Economic Coordination Committee (ECC).
He said that the government had created a monopoly of few industries with the help of these SROs.
FBR Chairman Hakeem said the country’s tax system was unfair and the effective customs tariffs were only 6% while 84% of the tariff lines were regulated by these SROs.
In his defence, he said the industry had become so addicted to the SRO culture that the plug could not be pulled at once. He said that withdrawing SROs will be a gradual process and the FBR was in the process of chalking out a detailed plan to withdraw exemptions and zero-tax facility allowed to a few industries.
However, he did agree that powers of levying or reducing taxes should be given back to parliament.
Published in The Express Tribune, December 19th, 2012.
The Public Accounts Committee (PAC) has admitted that parliament had “itself abdicated its powers to give tax concessions” which were then “massively abused” by government departments.
The country’s top accountability body stated that government departments, including the Federal Board of Revenue (FBR), misused the powers of parliament and made it a tool for striking underhanded deals by giving tax relief to various industries mounting to Rs659 billion over the years.
In a bid to foil such cases taking place in the FBR, the PAC has recommended parliament to amend the constitution and all relevant laws to take back these powers, which, they said, the FBR was abusing through issuance of Statutory Regulatory Orders (SROs).
Consequently, Parliament’s accountability body has constituted a seven-member inter-ministerial committee which will recommend how to proceed on this matter within a fortnight.
The committee will be headed by Planning Commission Deputy Chairman Dr Nadeemul Haque, who explained at length how the revenue board was abusing these powers. There was also a proposal to table a draft of SROs in relevant standing committees of Parliament during the PAC meeting.
This is one of the few instances where the FBR admitted guilt and its chairman, Ali Arshad Hakeem, said the “country’s tariff structure has been made in a way that allows arbitrage and rent seeking.”
“Levying or exempting tax is the responsibility of parliament, which has been taken over by the government departments through SROs, which is unlawful,” said PAC Chairman Nadeem Afzal Chan. He revealed that there was a clash between the Finance Bill, approved by Parliament, and the SROs, issued by the FBR.
Planning Commission Deputy Chairman Haque then briefed the PAC that the main objective of all IMF programmes was tax reforms, which could not be achieved as loopholes were created by arbitrarily issuing SROs by the FBR and the Economic Coordination Committee (ECC).
He said that the government had created a monopoly of few industries with the help of these SROs.
FBR Chairman Hakeem said the country’s tax system was unfair and the effective customs tariffs were only 6% while 84% of the tariff lines were regulated by these SROs.
In his defence, he said the industry had become so addicted to the SRO culture that the plug could not be pulled at once. He said that withdrawing SROs will be a gradual process and the FBR was in the process of chalking out a detailed plan to withdraw exemptions and zero-tax facility allowed to a few industries.
However, he did agree that powers of levying or reducing taxes should be given back to parliament.
Published in The Express Tribune, December 19th, 2012.