Too much power

Taxes that are not paid because of corrupt SROs are costing the national exchequer Rs200 billion.

It has been the biggest, dirtiest secret in Islamabad, but at last, the National Accountability Bureau (NAB) has begun investigating allegations of corruption against senior tax collection officials who allegedly received bribes in exchange for granting tax exemptions. The investigation is starting a few decades later than it should have, but at this point, we are grateful that it is starting at all.

We have long questioned the power of the top officials at the Federal Board of Revenue (FBR) to issue Statutory Regulatory Orders (SROs), which are administrative orders that officials use to increase or decrease tax rates on certain industries, or even specific companies and individuals, to rates very different from those set by parliament in the budgets and tax laws it passes. Effectively, it renders moot any legislation relating to taxation passed in the National Assembly, taking the right of making taxation decisions away from the elected representatives of the people and putting them into the hands of an unelected, secretive cabal of officials, who exploit this power unscrupulously for personal gain.

The scale of corruption is immense. According to preliminary investigations by NAB, such corruption is causing the national exchequer to lose Rs200 billion, or one per cent of the total size of the economy, in taxes that are not paid because of corrupt SROs. That is an astounding and unacceptable loss.

The effort by NAB to crack down on this gross corruption is laudable, but we would like the government to go one step further and completely ban SROs. This is not a power that should reside with the FBR in the first place. Even without this authority, the FBR has remarkable power: it has the right to take away money from the citizenry and give it to the government. Such a process should be done in the open, with laws debated in parliament, rather than in secret rooms at FBR headquarters across the street.

We are astonished to find that so many politicians are outraged at violations of Pakistani sovereignty over drone strikes, but fail to see the FBR’s use of SROs as an act that undermines the sovereignty of parliament. The SRO culture is where the heart of corruption in Pakistan lies. It must be stamped out completely.

Published in The Express Tribune, July 23^rd,  2013.

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