The government seems to be running away from its commitment to rewrite the country’s ailing tax policies as it plans to appoint a retired bureaucrat, who does not have any experience in tax laws, as head of the Tax Reforms Commission (TRC).
Sources in the Ministry of Finance and Revenue have said that the government is considering people for the job who are experts in public finance but have no relevant experience in tax law and its application. The ministry added the names of former federal secretary of finance Moeen Afzal and former governor State Bank of Pakistan Dr Ishrat Hussain as people being considered. Both men have considerable authority in their fields but lack experience in tax law.
“The names of both former state functionaries were proposed after the fruitless attempt to hand over the helm to chairman of the Federal Board of Revenue (FBR),” said the sources.
According to analysts, despite the presence of experienced professionals like former finance minister Dr Hafiz Pasha and tax lawyer Dr Ikramul Haq, the government’s desire to grant the responsibility to a retired bureaucrat suggests insincere efforts.
In his budget speech, Finance Minister Ishaq Dar announced to constitute a TRC aimed at rationalising all the taxes in order to run the system with transparency.
Dar acknowledged the need to carry out an in-depth analysis and review of the tax policies and administration of the country. The minister had also announced that the members of the commission will comprise of public finance experts, practitioners, businessmen, tax lawyers and retired civil servants.
While addressing a press conference this week, Dar said that the government would notify the commission before end of this month.
“A tax consultant has already completed a comprehensive study to reform the general system into a single-stage sales tax structure,” said FBR officials. “The study proposed the government to reduce the sales tax rate to approximately 7%, but they have not decided anything yet.
“This study, like many other reports including the one by Dr Pasha, has been put in shelves and forgotten.”
The sources added that the government was contemplating the appointment of the Federation of Pakistan Chambers of Commerce and Industry chief and four provincial chamber presidents as members of the proposed commission. But none of them are experts in the field of tax and their inclusion in the current system may be a deterrent to point out deficiencies.
The heads of these business bodies are also members of the Tax Advisory Council (TAC) that the government had constituted before presentation of this year’s budget. These influential people tried to get benefits for their own companies instead of giving any policy advice, according to officials privy to the TAC consultations.
The sources said even the FBR was reluctant to accept an independent commission that could overhaul the present tax system. They added that the terms of references of the commission that the FBR proposed to the finance minister were vague.
The business community and corrupt elements in the FBR were the beneficiaries of the status-quo, said sources. According to experts, the corporate and individual income tax system was against the principles of fairness. The system lessens the burden on one segment of the society at the expense of the other. Similarly, import tariffs are structured in a manner that protect a few pampered industries and discourage competition and entrance of new players in the market.
Published in The Express Tribune, August 10th, 2014.
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